Late Thursday, the US Securities and Exchange Commission (SEC) has filed Form C in its case against Ripple Labs, specifying the grounds of its appeal against Judge Analisa Torres’s final ruling from August 7. This filing, which was due by October 16, comes after the SEC’s initial Notice of Appeal on October 2 lacked detailed arguments.
Ripple Vs. SEC: Appeal Details
The SEC’s appeal targets specific aspects of the summary judgment that were favorable to Ripple. Attorney James “MetaLawMan” Murphy commented on the filing, stating that the SEC is appealing the rulings on “Ripple’s XRP sales through exchanges; Ripple’s distribution of XRP to employees and others; and Garlinghouse and Larsen’s sales of XRP on exchanges.”
Ripple Appeal Update.
The SEC has filed the Form C (a day late, in my view).
The SEC is appealing the summary judgment ruling on: (1) @Ripple‘s XRP sales through exchanges; (2) Ripple’s distribution of XRP to employees and others; and (3) Garlinghouse and Larsen’s sales of XRP… pic.twitter.com/zkaGQMnSgl
— MetaLawMan (@MetaLawMan) October 17, 2024
Notably, the SEC does not seem to appeal the remedies and disgorgement ruling as well as the decision by Judge Torres that XRP itself is not a security. Murphy remarked via X, “This is what we expected. Mildly surprising that they did not appeal the $0 ruling on disgorgement.”
Fred Rispoli, a pro-XRP lawyer and founder of HODL Law, weighed in on the implications for Ripple’s executives, Brad Garlinghouse and Chris Larsen. “Just when they thought they were out, the SEC pulled Brad and Chris back in,” he remarked. Rispoli pointed out that the SEC never stipulated to a dismissal of all claims against the two executives, only those related to institutional sales. “The SEC implies they are still coming after Garlinghouse and Larsen on programmatic sales,” he noted, expressing surprise that Ripple’s legal team did not secure a more comprehensive dismissal in the initial agreement.
Rispoli emphasized the gravity of the case now that it has reached the Second Circuit Court of Appeals. “The Second Circuit is the big leagues, and the SEC cannot afford to clown around like it has been at the district court level,” he said. He suggested that the SEC recognized that pursuing disgorgement—a financial penalty requiring the return of ill-gotten gains—was unlikely to succeed on appeal, despite having argued for it before Judge Torres. “It wisely recognized disgorgement was a loser argument and has not raised it as an appellate issue,” Rispoli commented.
There is some procedural ambiguity regarding the timing of the SEC’s filing. Murphy observed that while the SEC’s Form C is dated October 16, the court’s file stamp indicates it was filed on October 17. According to procedural rules, the SEC was required to submit Form C within 14 days of filing the Notice of Appeal, making the deadline October 16 at 11:59 pm EST. “We should find out soon whether the Second Circuit concludes that the SEC has missed the deadline,” Murphy stated.
Missing this deadline could have serious consequences for the SEC’s appeal, as Bitcoinist reported yesterday. Rispoli pointed out that the Local Rules of the Second Circuit (Rule 12.1(d)) state that failure to comply “may result in dismissal of the appeal.” However, he tempered this by noting that appellate courts often grant leeway to federal agencies. “Even a lame excuse from the government is likely enough to allow the court to let it slide,” he remarked.
However, Rispoli also has a few words of warning at the end that the SEC could still provide some nasty surprises. “SEC has announced it could appeal any aspect of that. So there is the obvious (Programmatic Sales, Other Distributions) and the less obvious (whether XRP is inherently an investment contract). We won’t know until the briefing comes out but no question the issues are at minimum what were raised in the request for an interlocutory appeal.”
At press time, XRP traded at $0.5474.
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