Published in cooperation between Bazoom and the Morgan Hill Times
No one really pays attention to the events that lead to the birth of a landmark case, but they sure pay attention after. SEC v Ripple will always be remembered as a defining moment in the evolution of regulations in the cryptocurrency industry.
Judge Analisa Torres of the United States Southern District Court of New York ruled on August 7 that Ripple must pay the Securities and Exchange Commission a penalty of $125,035,150.00 and impose a permanent injunction on the company to desist from violating Section 5 of the Securities Act in the future.
The SEC filed its initial complaint against Ripple in December 2020. The agency claimed Ripple had sold its token, XRP, in unregistered securities transactions, thereby violating Section 5 of the Securities Act, which provides that all issuers must register non-exempt securities with the SEC.
The case sets a precedent for how cryptocurrency developers can raise funds for their projects legally through sales on exchanges, as this was not deemed securities per the court’s ruling. Additionally, following the verdict, it seems like more people are rolling the dice with XRP.
The value of the XRP has spiked by over 26 %, signaling renewed community trust in the token. The currency, which was created primarily to serve as a mediator for currency exchange, has found value in different industries, including gaming. For example, XRP Dice is quickly becoming a favorite among gamblers due to its flexibility in cross-border transactions.
Ripple CEO Brad Garlington described the ruling as a “victory.” In an X post after the judgment, he wrote, “This is a victory for Ripple, the industry, and the rule of law. The SEC’s headwinds against the whole of the XRP community are gone.”
While Ripple is taking a beating, with the fine imposed significantly higher than the $10 million It requested the penalty be capped at, the SEC is definitely not getting the better deal, as the fine is only a fraction of the $2 billion it was seeking. The question of whether Ripple’s battle with the SEC is over is yet to be decided, as the SEC has until October 7 to appeal the decision.
In a parallel but equally significant crypto case, a settlement between FTX Trading and the Commodity Futures Trading Commission was approved by a federal judge. While critics of the cryptocurrency industry will always point fingers at the Ripple and FTX cases as to why the government must put a leash on overambitious cryptocurrency entrepreneurs, these cases are also significant in that they are helping to map out the regulatory landscape for cryptocurrency as people are adjusting to the thriving digital economy.
The approved FTX settlement was negotiated for a lawsuit against FTX for violations of the Commodity Exchange Act and for allegedly committing fraud when it used customer funds to pay debts owed by Alameda, an entity also owned by FTX founder Sam Bankman-Fried.
In addition to an admission that it misappropriated customer funds, the settlement includes the payment of $8.7 billion in restitution to persons who suffered losses from the violations and an additional $4 billion settlement in bankruptcy court as disgorgement for the gains made from their violations.
