Ripple still hopes to settle charges by the Securities and Exchange Commission calling its sales of XRP an unregistered and illegal sale of securities.
In a joint submission to Judge Annalisa Torres of the federal district court for the Southern District of New York on Feb. 15, the SEC poured cold water on the idea of settling the case, saying it had met with lawyers for Ripple, its executive chairman Chris Larsen, and CEO Brad Garlinghouse and “having previously discussed settlement, do not believe there is a prospect for settlement at this time.”
Ripple and its two top executives—who are being sued individually for selling $600 million in XRP, in addition to Ripple’s $1.38 billion—agreed with that, but noted:
“[P]revious settlement discussions took place under a previous administration and were principally with relevant division directors who have since left the SEC.”
Specifically, previous discussions took place under former SEC chair Jay Clayton and his top lieutenants, whereas the new acting SEC chairman, Gary Gensler, has a much deeper understanding of cryptocurrencies and the underlying blockchain technology. A former chairman of the Commodity Futures Trading Commission (CFTC), Gensler spent the last few years teaching cryptocurrency and blockchain at MIT, and has been a fixture at industry events.
Among those expecting a settled solution to the Ripple vs. SEC battle is Mati Greenspan, founder of Quantum Economics.
“Gensler and Garlinghouse will need to negotiate,” he told Modern Consensus recently. Arguing that Gensler has no reason to care what Clayton’s SEC wrote in its legal filing, Greenspan added:
“There is no doubt in my mind Ripple will come through the other end—the only question is the price tag.”
Which isn’t to say that the SEC staffers fighting the lawsuit aren’t behind it. As Ripple mentioned repeatedly in its many filings—while slamming the SEC for taking so long to act—the agency’s enforcement division been investigating the company for a long time.
Opposing the agency’s request for more than the 10 depositions Judge Torres allowed, Ripple said, “the SEC has been actively investigating this matter for more than 2.5 years already, has already received hundreds of thousands of pages of documents, and taken numerous party testimony and third-party proffers.”
That said, Ripple at least claims it is not eager to settle either.
Noting that it “agreed to a rapid discovery schedule” ending on Aug. 16—in legalese six months is apparently rapid—Ripple said it did so to enable it “to file a motion for summary judgment as soon as possible. It respectfully urges the Court to bring this case to a just and speedy resolution and to remove the cloud that the SEC’s misguided actions have cast over all participants in the XRP market.”
That cloud being the damage the Dec. 22 lawsuit did to XRP’s price in the secondary market, which Ripple called “devastating.” While XRP did fall from $0.56 to $0.18 in the days after the SEC’s filing, the cryptocurrency’s price hit $0.61 over the weekend, about where the price was before the lawsuit hit. (It’s currently $0.51) Of course, XRP was on fire before the lawsuit dropped, and since then has fallen to the No. 6 cryptocurrency by market capitalization, down from No. 3 at the time.
As for the SEC, it reached deep into its thesaurus to call Ripple’s position that XRP is a currency rather than a security “a canard.”
In the joint filing, the SEC added that Ripple, Garlinghouse, and Larsen “promoted and sold XRP as an investment that purchasers reasonably believed would increase in value and price based upon Ripple’s touted efforts—its self-described ‘XRP strategy’—to create an active and liquid trading market for XRP and other infrastructure for XRP… As the SEC alleges and the evidence will show, Ripple was the principal party behind the success or failure of this ecosystem.”