Late Thursday, the US Securities and Exchange Commission (SEC) submitted Form C in its legal battle against Ripple Labs, outlining the reasons for its appeal against Judge Analisa Torres’s final determination from August 7. This submission, which was required by October 16, follows the SEC’s initial Notice of Appeal on October 2 that was devoid of specific arguments.
Ripple Vs. SEC: Appeal Overview
The SEC’s appeal focuses on particular features of the summary judgment that favored Ripple. Attorney James “MetaLawMan” Murphy commented on this filing, indicating that the SEC is contesting the rulings concerning “Ripple’s XRP sales via exchanges; Ripple’s distribution of XRP to its employees and others; and the sales of XRP by Garlinghouse and Larsen on exchanges.”
Ripple Appeal Update.
The SEC has submitted Form C (technically a day late, in my opinion).
The SEC is challenging the summary judgment ruling on: (1) @Ripple’s XRP exchanges sales;
(2) Ripple’s distribution of XRP to employees and others; and
(3) Sales of XRP by Garlinghouse and Larsen… pic.twitter.com/zkaGQMnSgl— MetaLawMan (@MetaLawMan) October 17, 2024
Importantly, the SEC does not appear to be contesting the ruling on remedies and disgorgement or Judge Torres’s determination that XRP itself is not classified as a security. Murphy commented on X, noting, “This aligns with our expectations. It is slightly surprising they did not appeal the $0 ruling regarding disgorgement.”
Fred Rispoli, a pro-XRP attorney and founder of HODL Law, shared his thoughts on the ramifications for Ripple’s executives, Brad Garlinghouse and Chris Larsen. “Just when they thought they were free, the SEC pulled Brad and Chris back in,” he stated. Rispoli emphasized that the SEC had not stipulated to a dismissal of all claims against the two executives, just those tied to institutional sales. “The SEC insinuates that they are still targeting Garlinghouse and Larsen regarding programmatic sales,” he highlighted, expressing surprise that Ripple’s legal team did not manage to secure a more extensive dismissal in the initial deal.
Rispoli underscored the significance of the case now that it has advanced to the Second Circuit Court of Appeals. “The Second Circuit represents the big leagues, and the SEC cannot afford to mess around as it did at the district court level,” he noted. He suggested that the SEC acknowledged that pursuing disgorgement—a financial penalty mandating the return of illicit gains—would likely be futile on appeal, despite having previously argued for it before Judge Torres. “They sensibly recognized that disgorgement was a weak argument and have not raised it as an issue for appeal,” Rispoli remarked.
There exists some procedural uncertainty concerning the timing of the SEC’s submission. Murphy pointed out that while the SEC’s Form C is dated October 16, the court’s timestamp indicates it was filed on October 17. Under procedural guidelines, the SEC was obligated to file Form C within 14 days of submitting the Notice of Appeal, making the deadline October 16 at 11:59 pm EST. “We should soon discover whether the Second Circuit determines that the SEC has missed this deadline,” Murphy stated.
Missing this deadline could have significant repercussions for the SEC’s appeal, as Bitcoinist reported yesterday. Rispoli highlighted that the Local Rules of the Second Circuit (Rule 12.1(d)) stipulate that non-compliance “may lead to the dismissal of the appeal.” However, he moderated this by mentioning that appellate courts frequently grant leniency to federal agencies. “Even a flimsy justification from the government is likely to suffice for the court to overlook it,” he observed.
Nevertheless, Rispoli also issued a cautionary note at the end, noting that the SEC could still throw some unexpected challenges. “The SEC has indicated it may appeal any part of that. So, there are the obvious (Programmatic Sales, Other Distributions) and the less evident (whether XRP is inherently an investment contract). We won’t know until the briefs are submitted, but there’s no doubt the issues are at least what were presented in the request for an interlocutory appeal.”
At press time, XRP was trading at $0.5474.
Featured image created with DALL.E, chart from TradingView.com
