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April

The legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple Labs, the company behind the cryptocurrency XRP, has intensified as both parties proceed with drafting remedy-related briefs. This ongoing dispute stems from the SEC’s allegations that Ripple’s XRP token sales constituted unregistered securities offerings, violating federal securities laws. 
Recent developments following Judge Torres’ summary judgment decision have prompted further legal actions, including the SEC’s motion for an interlocutory appeal. As the dispute progresses, both parties engage in remedies-related discovery and prepare their respective briefs to address the breach of Section 5 of the U.S. Securities Act. 
<h2 class="wp-block-heading" id="sec-vs-ripple-war-rages-on">SEC vs. Ripple war rages on</h2> 
The legal struggle between Ripple Labs and the United States Securities and Exchange Commission (SEC) continues as we approach the critical dedline. As the litigation moves into the “remedies” phase, critical financial and operational data are kept secret until this vital date. 
Meanwhile, investors are keenly awaiting the eventual outcome of Ripple’s legal battle with the SEC, which could influence future case outcomes. 
The SEC and Ripple will now start crafting remedy-related briefs. According to the court’s submission schedule, the SEC must submit its remedy-related brief by March 13. The SEC will seek punitive disgorgement to dissuade corporations from violating Section 5 of the US Securities Act. 
The extent of the penalty that Ripple must pay for XRP sales to institutional investors is undetermined. The court ruling could be based on whether Ripple continued to violate Section 5 of the US Securities Act following the December 2020 complaint. 
In January, Judge Sarah Netburn granted the SEC Motion to Compel and ordered Ripple to 
1. Provide financial accounts for 2022/2023. 
2. Disclose post-complaint XRP sales contracts to institutional investors. 
3. Respond to an interrogatory regarding the amount of XRP institutional sales proceeds after the SEC filed the complaint. 
Judge Netburn made a few observations in the court ruling that are worth considering. They 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 noted that the SEC made adequate evidence to demonstrate that post-complaint XRP institutional sales revenues could help the courts determine a remedy. 
Given Judge Netburn’s findings and comments, Ripple may risk a significant punishment if it continues to violate Section 5 of the US Securities Laws following the lawsuit. However, US courts are likely to evaluate XRP sales to US institutional investors. 
<h2 class="wp-block-heading" id="the-sec-faces-troubled-times-in-the-us-courts">The SEC faces troubled times in the US courts</h2> 
In December, Alderoty provided several examples of court rulings criticizing SEC practices. The increasing court scrutiny of the SEC may have an impact on the outcome of ongoing cases against crypto firms. 
Furthermore, ongoing inappropriate behavior may force US lawmakers to act on recent warnings. 
On February 7, five US Senators, including Cynthia Lummis, signed a letter to SEC Chairman Gary Gensler. Senators reacted to the SEC dropping its accusations against Debt Box. Significantly, the Senators threatened to scrutinize other enforcement cases. 
Last Monday, Chair Gensler dismissed the increased scrutiny, stating: 
<blockquote class="wp-block-quote"> 
 &nbsp;I think we’re doing everything according to the law and how the courts interpret the law. And as the courts shift their interpretations, jobs like mine are both more challenging and more interesting. <cite>Gary Gensler</cite>
</blockquote> 
Ripple must submit its remedy-related brief by April 12. US case law may benefit Ripple, especially if there were no post-complaint XRP sales to US institutional investors. 
The legal defense team could consider the following reasons to reduce the penalty: 
In 2010, the US Supreme Court determined that the SEC’s jurisdiction is limited to sales made in the United States. Morrison vs National Bank of Australia. 
More recently (2023), the Second Circuit determined that the court must evaluate whether the misled investors suffered financial hardship. No harm, no foul. SEC v. Govil. 
Sales of XRP to US accredited investors are exempt from Section 5 of the US Securities Act. 
Net earnings from <a href="https://www.coingecko.com/en/coins/binance-peg-xrp/usd" rel="nofollow noopener" target="_blank">XRP </a>sales to US institutional investors exceed the limits of any exemption against SEC.

SEC and Ripple lock horns amid draft remedy briefs

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