Ripple CLO Takes Aim At SEC, Agency’s Legal Loss To Boost Ripple Case?

Ripple’s Chief Legal Officer, Stuart Alderoty, took aim at the Securities and Exchange Commission with his latest comments.

Alderoty noted an appellate court’s decision to uphold the earlier Govil ruling, which stated that if there cannot be financial loss shown on the part of buyers or investors, the SEC cannot seek massive disgorgement fines from the seller.

In simple terms, if there are no injured parties, the SEC can’t seek disgorgement-related damages.

This ruling is believed to be bullish for Ripple Labs and could potentially aid the crypto firm in its legal battle against the SEC. On Thursday, Alderoty pointed out:

“The SEC continues to lose. The Second Circuit Court of Appeals refused to reconsider their decision in Govil which held that if a buyer suffers no financial loss, the SEC is not entitled to disgorgement from the seller.”

The SEC continues to lose. The Second Circuit Court of Appeals refused to reconsider their decision in Govil which held that if a buyer suffers no financial loss, the SEC is not entitled to disgorgement from the seller. https://t.co/AOEHcyiajo pic.twitter.com/TPCbmAcAmY

— Stuart Alderoty (@s_alderoty) April 11, 2024

ZY Crypto provided some background context on the ruling:

The SEC’s recent defeat occurred in its lawsuit against Aron Govil, where the Second Circuit Court of Appeals declined to review its decision from last year.

Despite the SEC’s attempt to appeal this decision, the court stood by its initial ruling, dealing a blow to the commission’s legal strategy.

Attorney Bill Morgan shared his thoughts on the recent legal development:

“But the SEC relies on Govil as authority for the proposition that if investors suffer financial loss or pecuniary harm then disgorgement is measured by the “ill-gotten gain.”

Although Govil helps Ripple if institutional investors suffered no pecuniary harm the SEC alleges investors did suffer pecuniary harm.

Therefore the SEC relies on the Govil decision and is claiming disgorgement of all institutional sales revenue (the alleged ill-gotten gains) of Ripple less cost of revenue expenses related to institutional sales.

The SEC claims the cost of revenue expenses are only just under $115 million, and this is all that is set off against claimed institutional sales of $991 million.

Of course if Ripple shows that no institutional investor suffered financial loss then the fact the Second Circuit Court of Appeals did not reconsider Govil is a good thing for Ripple.”

But the SEC relies on Govil as authority for the proposition that if investors suffer financial loss or pecuniary harm then disgorgement is measured by the “ill-gotten gain”. Although Govil helps Ripple if institutional investors suffered no pecuniary harm the SEC alleges… https://t.co/vZ8zXZYwOC

— bill morgan (@Belisarius2020) April 11, 2024

SEC v Govil is a Court of Appeals Second Circuit decision and the Court of Appeals Second Circuit as part of its reasoning found that the District Court did not find that the investors suffered pecuniary harm but ordered disgorgement. This was found by the Second Circuit to be… https://t.co/qDQEP0uyeG

— bill morgan (@Belisarius2020) April 12, 2024

Bitcoinist writes:

These negative developments do not look good for the Commission, as they could be viewed as inaccurate decisions from the body.

Additionally, it can also be considered an abuse of authority since there are already speculations that the SEC enforcement actions are exceeding its jurisdiction.

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