The U.S. Securities and Exchange Commission (SEC) has officially filed its civil appeal pre-argument, also known as Form C, along with relevant attachments in its lawsuit against Ripple. Noted defense lawyer James K. Filan brought attention to the filing in a tweet yesterday.
According to the filing, the SEC provided details of the lawsuit, including the date of the final judgment and appeal notice, the district court judge who ruled on the case, and the docket number. The SEC also summarized the district court’s decision, highlighting that it granted and denied the SEC’s motion for summary judgment in part.
Specifically, the court ruled that Ripple’s offers and sales on digital exchanges and its use of XRP as a payment method do not qualify as investment contracts. However, the court found that Ripple violated securities laws by offering and selling XRP to institutional clients. As a result, the court imposed a penalty of $125.03 million on Ripple and issued an injunction to prevent future violations of the 1933 Securities Act.
The SEC’s Form C filing sheds light on the specific aspects of the case that the regulator seeks to appeal. The commission questions whether the New York district court erred in declaring that Ripple’s sales of XRP on digital exchanges, including those by Ripple executives Brad Garlinghouse and Chris Larsen, do not constitute investment contracts. These transactions were previously categorized as programmatic sales and deemed non-securities on July 13, 2023.
Additionally, the SEC aims to appeal the aiding and abetting charges it initially filed against Garlinghouse and Larsen. The SEC dropped these charges when a jury trial was scheduled for 2023 but now seeks to revive the case against Ripple’s executives.
The SEC is also challenging the district court’s verdict regarding Ripple’s use of XRP as a form of payment. The agency considers these transactions as other distributions of XRP by Ripple.
Ripple’s Chief Legal Officer, Stuart Alderoty, responded to the SEC’s Form C filing, stating that it was not surprising as he had predicted that the regulator would contest these issues on appeal. However, he emphasized that the regulator is not challenging the court’s declaration that “XRP is not a security,” affirming that XRP remains a non-security according to the law.
Alderoty revealed that Ripple will file its own Form C next week, related to the company’s cross-appeal introduced on October 10. Ripple believes that the district court erred in its ruling on institutional sales, which favored the SEC.
Legal expert Jeremy Hogan expressed excitement about the SEC’s Form C filing. Hogan suggested that the SEC’s appeal is primarily focused on increasing Ripple’s fine and speculated that if Ripple loses the appeal, the injunction on its future institutional sales of XRP may change, indirectly affecting compliance.
Hogan also criticized the SEC for reviving the aiding and abetting charges against Ripple’s executives, calling it a “chicken move.”
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