According to U.Today, the ongoing legal dispute between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has seen a legal expert, known as 'MetaLawMan', highlight significant weaknesses in the SEC's arguments. The main point of contention is the alleged financial harm suffered by XRP investors due to Ripple's actions.
In July of the previous year, the court ruled that XRP was not a security in itself, but Ripple's institutional sales of XRP were unregistered securities. The SEC has since submitted its final reply brief in the remedies phase, and a decision from the judge is now awaited. The SEC's case largely depends on the claim that Ripple's actions have caused financial harm to investors. However, MetaLawMan's analysis suggests that the SEC's arguments may not withstand scrutiny.
MetaLawMan referred to an earlier lawsuit, the SEC v. Govil case, stating that the SEC's Reply Brief does not add anything meaningful to the argument about no victims/no disgorgement. In the Govil lawsuit, the 2nd Circuit ruled that if a buyer suffers no financial loss, the SEC cannot seek disgorgement from the seller.
In its reply brief in the Ripple lawsuit remedies phase, the SEC relied on one district court case (SEC v. iFresh) that held the 'pecuniary harm' requirement is satisfied when a stock price is artificially inflated. The SEC argues that any institutional buyer who received a lesser discount on XRP than others effectively paid an inflated price, hence, pecuniary harm. This broad interpretation appears to include any fall in XRP's value, which is overly broad and ignores the speculative nature of cryptocurrency investments.
MetaLawMan views the iFresh decision as a misreading of the 2nd Circuit holding in Govil on disgorgement. He also noted that the iFresh decision was classified as 'not for electronic or print publication', which he considers to be the weakest possible authority for anything. While it is possible that Judge Torres is going with iFresh's reasoning and finds that Ripple institutional Investors suffered pecuniary harm, MetaLawMan believes the most likely scenario is the reverse.
