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XRP News: SEC’s Motion to Compel Granted – Impact on SEC v Ripple Case

By:
Bob Mason
Published: Feb 6, 2024, 02:10 UTC

Amid SEC's motion to compel, Judge Sarah Netburn's ruling in the SEC v Ripple case holds the key to XRP's near-term future.

XRP News

Key Insights:

  • XRP gained 0.62% on Monday, ending the session at $0.5060.
  • Judge Netburn granted the SEC Motion to Compel, giving the US regulators access to post-complaint documents.
  • On Tuesday, SEC v Ripple case-related chatter and US regulatory commentary need consideration.

The Monday Overview

On Monday, XRP gained 0.62%. Partially reversing a 2.93% decline from Sunday, XRP ended the Monday session at $0.5060.

SEC v Ripple Update: Judge Netburn Granted SEC Motion to Compel

On Monday, SEC v Ripple case-related updates garnered investor interest. Judge Sarah Netburn granted the SEC Motion to Compel. Defense attorney James Filan shared the court ruling, saying the court granted the Motion to Compel without exception.

The SEC filed the Motion to Compel, asking the court to order Ripple to provide:

  • 2022/2023 financial statements.
  • 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.

Judge Netburn responded to the individual requests.

For the 2022-2023 financial statements, Judge Netburn ruled there was no reason to deny access to readily available documents that could assist the remedy stage. The court cited SEC v Rajaratnam, saying,

“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.”

Regarding post-complaint contracts governing XRP sales to institutional investors, Judge Netburn noted,

“The SEC credibly argues that the District Judge may consider post-complaint conduct when determining whether an injunction is necessary and just.”

On the matter of responding to questions relating to XRP sales proceeds from institutional sales after the SEC filed the complaint, Judge Netburn cited Vacold LLC v Cerami, saying,

“The purchase of a security occurs when the parties to the transaction are committed to one another.”

Judge Netburn noted that the SEC presented sufficient arguments to show that post-complaint XRP institutional sales proceeds could assist the courts in deriving a remedy.

The ruling could significantly influence the penalty for XRP sales to US institutional investors.

SEC v Ripple and Post Complaint Activity

The SEC continues to argue for a punitive disgorgement to send a message to the US crypto market.

The court ruling enables the SEC to ascertain whether Ripple continued to breach Section 5 of the Securities Act after the complaint and the July 2023 ruling. Judge Analisa Torres ruled Ripple breached Section 5 of the Securities Act for XRP sales to institutional investors.

Nonetheless, the court ruling does not automatically translate into a more punitive penalty.

After remedies-related discovery, the SEC must file its remedy-related brief by March 13. The SEC must demonstrate that Ripple continued to break the law to warrant an injunction. The SEC must also show the proceeds from illegal activity from the date of the complaint and the July 2023 court ruling.

Ripple must file a remedy-related brief by April 12. Using US case law, Ripple could present various arguments against a punitive penalty, including,

  • Morrison vs NAB: The US Supreme Court ruled the SEC only has jurisdiction over US-based sales.
  • Liu v SEC: The court ruled a disgorgement amount must not exceed the net profits derived from the illegal activity.
  • SEC v Govil: The court ruled the SEC may not ask for a punitive penalty without demonstrating actual financial harm to investors.

Ripple will also demonstrate XRP sales to US-accredited investors. Sales to accredited US-accredited investors may fall under exemption to Section 5 of the Securities Act.

Before the court ruling, amicus curiae attorney John E Deaton recently said,

“It is quite possible that Ripple would be able to show an exemption to the vast majority of those institutional sales. […] It’s quite possible that the Judge could fine Ripple something like $10 million.”

Deaton believes that the SEC fears most of the XRP sales to US institutional investors were to US-accredited investors.

XRP Price Action

Weekly Chart sends bearish price signals.
XRPUSD 060224 Weekly Chart

Daily Chart

XRP remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A return to the $0.52 handle would support a move toward the $0.5470 resistance level. An XRP move through the $0.5470 resistance level would give the bulls a run at the 50-day and 200-day EMAs.

Investors must consider SEC v Ripple case-related chatter, US regulatory scrutiny, and SEC activity.

However, a break below the $0.5042 support level would bring the $0.4700 support level into play.

The 14-day RSI reading, 37.24, suggests an XRP fall below the $0.49 handle before entering oversold territory.

XRP Daily Chart affirms bearish price signals.
XRPUSD 060224 Daily Chart

4-Hourly Chart

On the 4-hourly, XRP hovered below the 50-day and 200-day EMAs, reaffirming bearish price signals.

An XRP break above the 50-day EMA would support a move toward the 200-day EMA and the $0.5470 resistance level.

However, a break below the $0.5042 support level would support a fall toward the $0.4700 support level.

The 4-hourly RSI, with a reading of 45.07, suggests an XRP fall to the $0.4700 support level before entering the oversold territory.

XRP Four-Hourly Chart reaffirms bearish price signals.
XRPUSD 060224 4-Hourly Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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