Ripple vs SEC: Indictment, Trials, Dates and Updates

The process between Ripple and the US Securities and Exchange Commission continues. We have summarized the most important facts about the procedure for you.

The SEC indictment against Ripple Labs put many investors and the crypto scene in shock last December. The case is still not closed, with the US company Ripple Labs based in San Francisco having at least partial success.

In this article, we would like to give you an overview of the "Ripple vs SEC" case. The content summarizes the most important events chronologically and is updated regularly.

The Trial Between Ripple and SEC: The Prosecution

On December 22, 2020, the SEC first filed an indictment against Ripple Labs and CEO Brad Garlinghouse and co-founder Christian Larsen.

The accusation: securities trading without a license.

A total of 14.6 billion XRP are said to have been sold, and thus a sum of more than 1.3 billion USD has been raised without this having been reported.

Allegation 1: Trading in securities without a license

Essentially, it deals with Sections 5 (a) and 5 (c) of the Securities Act of 1933. The US Securities and Exchange Commission accuses Ripple Labs, Brad Garlinghouse and Christian Larsen that XRP is not registered as a security with the SEC, and disposals were not reported. These sums were used for the personal enrichment of the two defendants and to finance Ripple Labs’ operations.

Accusation 2: Price manipulation by Ripple Labs

The SEC also accuses the two Ripple officials of holding “significant amounts” of XRP and “benefiting” from it. They are said to have purposefully bought and sold XRP in order to generate artificial trading volume. This also includes the allegation of price manipulation.

Accusation 3: Stock market manipulation and bought listings

Both Garlinghouse and Larsen have repeatedly emphasized the relevance of trading XRP on crypto exchanges and the trading volume. And the SEC goes one step further and states that Ripple is said to have paid exchanges for listings.

In one example, 17 million XRP are said to have been paid to an unnamed exchange so that XRP would be listed and released for trading. Other large sums have flowed monthly as an “incentive for the dealers”.

The SEC, therefore, classifies XRP as security and not as a cryptocurrency.

According to its statements, the SEC warned Ripple in this regard as early as 2012. However, the company did not respond to the warnings and launched the cryptocurrency. In addition, those responsible for Ripple had enriched themselves through the cryptocurrency, according to the allegations of the SEC.

But how did the indictment come about, and how are the current negotiations going?

Chronology: The most important dates of the legal dispute with SEC

Shortly before Christmas, the news caused a sensation and shock in the crypto scene. Although authorities and governments had repeatedly warned against cryptocurrencies over the years and cases of fraud occurred now and then ( e.g., Bitconnect ). Very few people had expected that the third-largest cryptocurrency in the world would make such negative headlines.

The following summarizes the most important historical dates and results of the litigation between Ripple and the SEC.

December 21, 2020: Rumors about SEC lawsuit are growing

Ripple CEO Brad Garlinghouse announced that the US Securities and Exchange Commission is probably planning an indictment against Ripple. However, the rumors have not yet had any impact on the course. Ripple started the day at $ 0.5569 and ended the day at $ 0.5169. The first uncertainty is spreading in the market.

12/22/2020: SEC submits application

The rumors come true. Ripple is charged by the US Securities and Exchange Commission. Investors are in shock, the XRP price collapses. The XRP price is now suffering a final setback to USD 0.25. Within a day, XRP had lost half of its value.

Many crypto exchanges also react very quickly and remove Ripple's XRP, at least temporarily. Ripple's XRP is now mainly bought by pure speculators. Because making real prognoses about a possible outcome is actually not possible at this point.

01/07/2021: Grayscale drops Ripple

The indictment made a huge impact on Ripple within two weeks. While many Exchanges decided to remove XRP, Grayscale also draws its consequences and throws Ripple out of the Grayscale Digital Large Cup Fund.

At the same time, the crypto exchange is now announcing that it will cease trading with Ripple on January 14, 2021. The stock exchanges also saw themselves in danger.

Because if XRP were to be a security according to the indictment, the stock exchanges in the USA would also conduct unauthorized securities trading.

In the following weeks, too, there will be news about Ripple almost every day. More and more exchanges are canceling the cryptocurrency XRP. But Grayscale and stand out because of their size in these weeks.

April 6, 2021: Ripple’s comparison with Ethereum and Bitcoin

Is XRP comparable to ETH and BTC?

If the SEC has its way, this is not the case. Ripple sees it differently and is of the opinion that the SEC has not differentiated XRP from other cryptocurrencies over the years. Therefore, Ripple's goal was to get SEC documents about ETH and BTC.

In April, Judge Sarah Netburn finally approved Ripple’s request for the US Securities and Exchange Commission to hand over internal documents relating to Bitcoin and Ethereum. A big success. Because the defense of Ripple is mainly based on equating XRP with Ethereum and Bitcoin.

The SEC had already stated that it was not planning any action against Ethereum or trading in Bitcoin.

06/16/2021: Ripple does not have to present bank documents

The SEC requested disclosure of internal bank documents from the past eight years. But as the responsible district court in New York decided, the SEC cannot view these documents.

There was no clear sense of the indictment behind this step.

With that, Ripple gets the next victory. Because while the SEC has been asked to release internal documents, Ripple does not have to do so.

08/27/2021: Do SEC employees have XRP inventories?

The case caused tremendous excitement, especially in August. SEC employees are not allowed to hold any securities. Therefore, Ripple lawyers demand that SEC employees send anonymous data on any XRP ownership. In the wording, it said:

The defendants have a right to know whether the SEC has allowed their own employees to sell, buy, and hold XRP as a market participant at the exact same time that the SEC claims the defendants were selling of XRP violated the law and acted recklessly.

Ripple’s lawyers argue that the employees were probably only informed that cryptocurrencies could be securities on January 19, 2018. This information can be found in the documents viewed so far.

This would also mean that the SEC had not classified Ripple as security for a long time.

Until 2018, the SEC began to deal extensively with cryptocurrencies. At that time, the stock exchange regulator declared that it was not considering a blanket trading ban on cryptocurrencies. You want to decide on a case-by-case basis. Therefore, the Ripple attorneys would like to see documents showing specific research on Ripple.

The SEC has since filed an objection to this application. The SEC claims that this data contains sensitive financial information so that the SEC’s Ethics Committee can review employee compliance with the rules.

Updates on the current status of Ripple vs SEC

Due to the partial success, the cryptocurrency XRP could recover further and is currently quoted at USD 1.05 (as of October 6, 2021).

And not only that: Ripple has developed a good starting position over time and is now continuing to attack. But just when it was getting more precarious for the SEC, the US Securities and Exchange Commission could also post their first partial successes.

While things became very quiet in this case in the first few months after the indictment, the situation has come to a head-on on both sides since the end of August 2021. Since then, both sides have had a real exchange of blows to view as many documents and data as possible from one another.

09/02/2021: SEC continues to put email traffic under pressure

The big question is how the US Securities and Exchange Commission has judged cryptocurrencies internally over the years. A leaked email could now help Ripple.

According to media reports, an email confirms that the SEC has never set up rules internally against holding or trading in cryptocurrency. The exact wording of this email says:

Our Ethics Office maintains the Prohibited Holdings List, which relates to securities covered by 5 CFR 4401.102 (c) (1). BTC, ETH, and XRP never appeared on this list.

The deadlines for establishing facts and identifying experts have been extended to October 15 for the time being. But if there is no agreement, the case could extend into 2022.

September 4, 2021: SEC also strikes back

But it is by no means that Ripple is showing the SEC. Ripple now has to disclose around a million Slack messages. Slack is a communication platform that those responsible for Ripple have actively used.

Ripple had already presented Slack messages, claiming that this was all the messages. Ripple had long insisted that no news would be missing. Afterward, however, those respondents stated that this was probably a data breach and that some messages would have been missing.

The SEC finds this particularly suspicious and hopes that the further news will provide new clues in the proceedings. Ripple also has to submit emails. After failing to obtain internal documents from Ripple in June, this is one of the few good news in the proceedings for the SEC.

The SEC's next target: video recordings of internal meetings

09/23/2021: Court rejects Ripple request

At the end of August, Ripple Labs requested that SEC employees disclose their crypto holdings. Judge Sarah Netburn has now decided that employees do not disclose any information.

According to Netburn, it is private information that is protected by privacy. In addition, the results of this are not important for the judgment.

In addition, the SEC had already placed it on the blacklist in 2019, according to Netburn. Ripple said, however, that they were not notified of the ban on trading in Ripple for SEC employees until August 2021.

Current: Is there a comparison between Ripple and SEC?

While the proceedings have been dragging on for months and the deadline for the taking of evidence is nearing the end, a settlement could surprisingly now be initiated.

Both sides regularly requested internal documents from the opponent. The parties have decided out of court that the documents should remain under lock and key. It appears that both sides have lost interest in viewing these documents.

Both parties could gain an enormous advantage in legal proceedings by viewing the documents. The out-of-court settlement on this point indicates that the SEC and Ripple may want to reach an agreement.

12/31/2021: End of the court case between the SEC and Ripple in April 2022?

While many investors had wanted the legal process to end in 2021, the reality is different. In the short term, there was already talk of the end of 2022 – a comparison had recently become less likely again.

Meanwhile, attorney Jeremy Hogan does not believe that the lawsuit between the SEC and Ripple will drag on any longer. He assumes that the lawsuit will be dismissed in April 2022.

This could lead to many investors buying Ripple if they had not previously dared because of the lawsuit.

Ripple CEO Brad Garlinghouse also continues to expect a good end for Ripple. As recently as November, Garlinghouse had told CNBC that the judge was asking good questions and had realized that the lawsuit is not just about Ripple but about the entire crypto market.

Outlook for 2022: What will follow after the litigation?

Admittedly, it is challenging to predict, as the outcome is unclear despite the current situation. Ripple seemed very sure at times. The SEC had come under increasing pressure. Recently, however, the SEC has been able to get rid of the pressure.

Those responsible for Ripple had already stated that they wanted to go public as soon as the process was over. If you win, it could work. For a long time, an out-of-court settlement was expected. It will probably not come to that anymore.

However, should Ripple lose the case, this should significantly damage the XRP price. In addition, this could trigger a wave of further charges. The SEC has now also started investigations into the decentralized crypto exchange Uniswap, even if the circumstances are different from those in the case against Ripple.

Should Ripple actually emerge as the winner here, it would not only be a victory for Ripple but for the entire crypto market.

Because in similar cases, the companies behind the cryptocurrencies could refer to the Ripple case.

However, suppose it comes to the comparison. In that case, this should also feel like a victory for Ripple, as the company would have successfully defended itself against the SEC charges without suffering any major damage.

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