- XRP lags behind the market as investors await the SEC vs. Ripple verdict on institutional sales penalties.
- Ripple may face a $10M penalty if the court rules post-complaint XRP sales complied with US securities laws.
- The IG’s probe into SEC conflicts of interest could impact SEC’s appeal against the Programmatic Sales ruling.
XRP edged up on Thursday, June 27, currently trading at $0.475852, mirroring the broader crypto market’s movement. However, XRP lagged behind due to the impending verdict in the SEC vs. Ripple case and the SEC’s intention to appeal the ruling on Programmatic Sales of XRP. Investors eagerly await the court’s decision on penalties for alleged violations of US securities laws regarding XRP sales to institutional investors.
In March, the SEC filed a brief with the courts, asking for an almost $2 billion penalty and an injunction to prevent XRP sales to institutional investors. Ripple countered with a proposal of a $10 million penalty, emphasizing that it had not continued to breach US securities laws. Ripple also noted the absence of fraud allegations in the case.
The outcome of this case may hinge on the court’s interpretation of Ripple’s post-complaint activities. Ripple may avoid an injunction and potentially pay a $10 million penalty if the court agrees that post-complaint XRP sales were to accredited institutional investors, thus exempt from US securities laws. Additionally, Ripple argues that sales through ODL contracts do not qualify as investment contracts under the Howey Test since these contracts prevent profit or loss.
Investors speculate that the US courts may rule ODL contracts compliant with US securities laws. The Howey Test defines a security as an asset meeting four criteria, one being the expectation of profit. Ripple contends that ODL contracts explicitly prevent profits, indicating post-complaint compliance.
On Thursday, June 27, Ripple’s Chief Legal Officer Stuart Alderoty shared a recent court ruling criticizing the SEC for unlawfully rescinding a rule on proxy advisory firms. This highlights current court sentiment toward the SEC.
Moreover, the Office of Inspector General (IG) is nearing the conclusion of its investigation into alleged crypto conflicts of interest within the SEC, involving former Director William Hinman. Empower Oversight has accused Hinman of bias against XRP and Ripple due to his ties with Simpson Thacher, which promotes Enterprise Ethereum.
The US courts have ordered the SEC to disclose internal communications involving Hinman to Ripple. These documents reveal Hinman continued meeting with Simpson Thacher despite warnings from the SEC Ethics Division.
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