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Ripple v. SEC case: Regulator files response to defendants’ letters

Ripple v. SEC case: Regulator files response to defendants’ letters

As the court saga between Ripple and the United States Securities and Exchange Commission (SEC) continues, the regulator has filed its response to the blockchain company’s arguments that refer to other legal cases and their decisions that could have an impact on the cryptocurrency industry.

Indeed, the SEC has submitted its response to the two letters regarding supplemental authority from the bankruptcy case of the cryptocurrency lending platform Voyager Digital, as well as the Bittner v. United States case before the U.S. Supreme Court, according to a tweet posted by the U.S. defense attorney James K. Filan on March 23.

Earlier, Ripple’s legal team had submitted the decision in the Voyager bankruptcy case as a supporting argument for its fair notice defense, specifically Judge Michael Wiles’ remarks on the “significant uncertainties” in the crypto sector on which “regulators themselves cannot seem to agree.”

Meanwhile, the other letter concerns the Bittner v. United States case, in which a dual citizen of Romania and the U.S. failed to report all of his income. The ruling had concluded that “fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.”

SEC’s response

According to the SEC’s reply, the arguments to which the defendants refer in these letters do not hold water in the ‘fair notice’ defense and that “neither provides any basis to deny the SEC’s motion for summary judgment:

“The Letters set forth stray remarks from two cases in purported support of Defendants’ opposition to the SEC’s Motion for Summary Judgment. (…) Defendants contend that these excerpts support their ‘fair notice’ defense, but neither does so.”

As its reasoning, the SEC’s legal team asserted that the Bittner case concerned whether a penalty could be imposed once for each unreported foreign bank account or as a single fine and that it was concluded that the “rule of lenity” allowed a single penalty for the transgression but that the court’s decision did not suggest it could “be used to escape liability.

Referring to the Voyager case, the SEC said, “Defendants shamelessly mischaracterize the Voyager bankruptcy court’s statements and pluck choice phrases out of context in a misguided attempt to boost their unavailing ‘fair notice’ defense.”

“Nowhere in its order did the bankruptcy court ‘emphasize[]’ any supposed ‘’limited guidance… provided’ generally to market participants,’ (…) or even suggest that it applied outside the specific proceeding at hand.”

Who’s in the lead?

Previously, former lawyer and Evernode XRPL co-founder Scott Chamberlain has listed potential outcomes for the lawsuit, including summary judgments, a settlement between the parties, and a subsequent case that would explore if any of the XRP token sales in the U.S. included an unregistered investment contract.

Notably, his suggestions arrived after, in his view, Ripple scored a major win against the SEC with a ‘fatal’ exclusion of one specific witness, as Judge Analisa Torres issued an initial 57-page ruling in which both the blockchain company and the financial regulator were seeking to exclude expert testimonies from summary judgment.

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