SEC seeks financial records and sales details from Ripple Labs

WASHINGTON – The U.S. Securities and Exchange Commission (SEC) has escalated its legal actions against Labs Inc., filing a reply in further support of its motion to compel the blockchain company to produce financial records and details of sales contracts. The SEC’s latest move, filed today, seeks access to Ripple’s audited financial statements for 2022 and 2023, along with specific information on post-Complaint Institutional Sales contracts following their December 2020 complaint.

The regulator insists that the requested documents are crucial for determining appropriate penalties and ensuring Ripple’s compliance with future regulations. This focus is especially on Ripple’s On-Demand Liquidity (ODL) customers, which the SEC suspects could be subject to non-compliant sales practices. The SEC has invoked previous cases, such as “SEC v. Rajaratnam,” and instances of court-approved “extended discovery periods” to counter Ripple’s objections regarding the relevance and timing of the information requests.

In a strategic move to prevent what it perceives as potentially non-compliant future institutional sales by Ripple, the SEC is seeking an injunction rather than debating the legality of past sales. This approach indicates that the SEC is more concerned with future compliance than past actions.

Legal analyst Bill Morgan shed light on the implications of the SEC’s actions for Ripple, suggesting that the company might have to rethink its sales strategy for XRP, the digital currency central to Ripple’s ODL service. Any significant changes to Ripple’s strategy could directly affect its ODL operations.

Ripple has been arguing against the timeliness and relevance of these demands in relation to penalties for securities violations but is facing staunch opposition from the SEC who emphasizes their significance in shaping deterrent consequences. With the discovery phase concluding on February 12, 2024, legal experts are debating possible fines for Ripple’s alleged securities infractions through institutional XRP sales—estimates range widely from under $200 million up to $3 billion depending on Judge Torres’ ruling on whether these sales constitute securities violations.

The price of XRP, the cryptocurrency at the heart of the dispute, stands at $0.51231. Ripple’s response to the SEC’s demands and any adjustments to its operations could influence XRP’s market performance in the future.

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