MetaLawMan, a lawyer and cryptocurrency advocate, recently conducted an analysis. In your analysis Ripple He highlighted potential weaknesses in the arguments presented by the SEC, which is in a legal battle with the SEC.
What’s Happened So Far?
In December 2020, the SEC filed a lawsuit against Ripple and its executives. This case has been ongoing ever since. But things took a turn in July 2023 when Ripple scored a major victory when the court ruled that XRP itself was not a security and non-institutional sales of XRP did not count as securities offerings.
However, the court determined that Ripple’s sales of XRP to institutional investors could potentially be classified as unregistered securities offerings.
Currently, the case is in the settlement phase, where the court is considering potential penalties for Ripple if the SEC’s allegations are approved. One of the SEC’s main arguments relies on showing that Ripple’s actions caused financial harm to investors. However, legal expert MetaLawMan expresses doubts about the validity of this argument.
Opinion of a Legal Expert
MetaLawMan, SEC v. He points out that the Govil case sets a precedent. The 2nd Circuit Court of Appeals ruled that the SEC cannot seek disgorgement from a seller if the buyer suffers no financial loss. Ripple’s Chief Legal Officer Stuart Alderoty recently pointed out the Govil decision. Because this decision sets a high bar for the SEC to prove investor harm in the Ripple case.
The SEC, in its reply brief, SEC v. It attempts to identify investor damages by citing the iFresh case. This case argues that as long as the price of the asset is artificially inflated, “pecuniary damage” may be covered even if there is no direct financial loss.
However, MetaLawMan argues that the SEC’s interpretation of iFresh is overly broad. The SEC’s logic is cryptocurrency It claims to be applicable to any decline in the value of an asset, ignoring the inherent volatility and speculative nature of unit investments. Investors in this market are generally aware of the risks involved.
Additionally, MetaLawMan highlights the weakness of the SEC’s reliance on the iFresh case. This case has been designated as “not for public disclosure.” This shows that it should not be used as a legal precedent. Citing such a decision significantly weakens the SEC’s argument.
While there’s a chance the judge will side with the SEC’s iFresh-based interpretation, MetaLawMan believes it’s more likely that the court will not find sufficient evidence of investor harm, especially given the Govil precedent that other attorneys have also cited.
