The Tuesday Overview
On Tuesday, XRP declined by 0.09%. After a 1.01% rise on Monday, XRP ended the Tuesday session at $0.5622.
SEC v Ripple: The SEC Remedy-Related Brief
On Tuesday, there were no SEC v Ripple case-related updates to consider. Ripple and the SEC progressed through the remedies-related summary with no last-minute dramas to spook investors.
The SEC and Ripple will now begin drafting remedy-related briefs. According to the court briefing schedule, the SEC must file its remedy-related brief by March 13. The SEC will argue for a punitive disgorgement to deter firms from breaching Section 5 of the US Securities Act.
There is uncertainty about the likely size of the penalty that Ripple must pay for XRP sales to institutional investors. The court decision could hinge on whether Ripple continued to breach Section 5 of the US Securities Act after the December 2020 complaint.
In January, Judge Sarah Netburn granted the SEC Motion to Compel, ordering Ripple to,
- Provide 2022/2023 financial statements.
- Disclose post-complaint contracts governing XRP sales to institutional investors.
- Answer an interrogatory regarding the amount of XRP institutional sales proceeds after the SEC filed the complaint.
In the court ruling, Judge Netburn made certain statements that warrant consideration. These included,
- “Courts have no hesitation in concluding that, in calculating the size of a penalty necessary to deter misconduct, the extent of a defendant’s wealth is a relevant consideration.”
- “The SEC credibly argues that the District Judge may consider post-complaint conduct when determining whether an injunction is necessary and just.”
Judge Netburn also acknowledged that the SEC presented sufficient arguments to show that post-complaint XRP institutional sales proceeds could assist the courts in deriving a remedy.
Considering Judge Netburn’s ruling and comments, Ripple could face a hefty penalty if it continued to breach Section 5 of the US Securities Laws after the complaint.
However, the US courts will likely only consider XRP sales to US institutional investors.
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See all Ripple forecastsUS Case Law and the Ripple Remedy-Related Brief Filing
While the SEC will argue for a punitive disgorgement, US case law could limit the quantum of the penalty.
Ripple must file its remedy-related brief by April 12. US case law could favor Ripple, particularly if there were no post-complaint XRP sales to US institutional investors.
The legal defense team may consider the following arguments to limit the penalty:
- In 2010, the US Supreme Court ruled the SEC only has jurisdiction over US-based sales. Morrison v National Bank of Australia.
- More recently (2023), the 2d circuit ruled the court must consider whether the defrauded investors suffered financial harm. No harm, no foul. SEC v Govil.
- Exemption from Section 5 of the US Securities Act for XRP sales to US accredited investors.
- Net profits from proceeds of XRP sales to US institutional investors beyond the scope of any exemption. Liu v SEC.
Ripple will attempt to whittle down net proceeds for the court to consider in arriving at a penalty for XRP sales to US institutional investors. Importantly, there is a legal precedent that supports a less punitive disgorgement. However, post-complaint compliance with US Securities Laws is likely crucial.
The SEC must file a reply brief to the Ripple remedy-related brief by April 19. Importantly, the SEC will have an opportunity to reinforce its remedy-related brief and argue against Ripple’s filing.
XRP Price Action
Daily Chart
XRP hovered above the 50-day and 200 EMAs, sending bullish price signals.
An XRP return to the $0.57 handle would support a move to the $0.5835 resistance level.
SEC v Ripple case-related news needs consideration.
However, a break below the 200-day EMA would support a fall to the 50-day EMA and the $0.5470 support level.
The 14-day RSI reading, 59.26, indicates an XRP move to the $0.5835 resistance level before entering overbought territory.
4-Hourly Chart
On the 4-hourly, XRP remained above the 50-day and 200-day EMAs, affirming bullish price signals.
An XRP breakout from the $0.57 handle would bring the $0.5835 resistance level into play.
However, a drop below the 50-day EMA would give the bears a run at the $0.5470 support level and the 200-day EMA.
The 4-hourly RSI, with a reading of 52.65, suggests an XRP move to the $0.5835 resistance level before entering overbought territory.
