On Tuesday, XRP slid by 6.13%. After a 1.47% gain on Monday, XRP ended the day at $0.6295.
Investors Grow Wary on Latest SEC v Ripple Court Schedule
On Monday, Judge Analisa Torres issued the scheduling order for the final stage of the SEC v Ripple case. CryptoLaw US founder John E. Deaton shared his views on the scheduling order and what we can expect in the months ahead.
Based on the scheduling order, Deaton estimates a ruling within 60-90 days of the final scheduling date of April 29, 2024. The timelines point to a July 2024 court judgment.
Deaton discussed the remedies-related discovery, providing some more color. Key points included,
By February 12, 2024 – The SEC must frame what they believe is an appropriate fine for Ripple to pay. The judge said $770 m of institutional sales involved XRP transactions to institutional investors.
Remedies-related discovery includes written discovery, depositions, etc.
The SEC will give a number by March 13, 2024.
Ripple must respond to the SEC number and justifications by April 12, 2024.
The SEC can respond to the Ripple response by April 29, 2024.
SEC v Ripple: The Penalties
Regarding the disgorgement amount, Deaton shared relevant case law and likely numbers. Points to consider when understanding how a court reaches a final penalty include,
No fraudulent activity and no ‘bad will’ in the sale of XRP to institutional investors.
Case law: Liu v SEC: A disgorgement award must not exceed a wrongdoer’s net profits and must go to the victims.
Victims? Compensatory damages where they lost money.
The 2d Circuit (same Circuit as Ripple case): SEC v Govil: Court held that the SEC may not ask for a crippling disgorgement award w/o proving that investors suffered actual financial harm. In other words, no harm, no foul.
Morrison v NAB: US Supreme Court: The SEC only has jurisdiction over US-based sales. If Ripple made 95% of XRP sales outside the US, total US sales would be 5% of $770 million.
During remedies-related discovery and in the Ripple brief, Ripple will detail:
US and non-US XRP sales to institutional investors.
Net profit, which excludes business expenses, for US business.
Economic loss suffered by institutional investors. How many investors bought XRP at the current price or higher?
ODL Transactions: No economic loss involved. How much of XRP institutional sales were ODL sales? Ripple would exclude these.
SEC v Ripple: The Conclusion
Considering the case law, the exclusion of ODL sales, and the non-fraudulent nature of the case, Deaton predicts Ripple will pay less than the $150 million legal bill.
Wrapping things up, the amicus curiae attorney considered how crypto and non-crypto investors will consider the SEC case against Ripple and others.
Deaton thinks people will say 100s of millions of dollars were spent on legal fees in the SEC v Ripple case. Ripple will pay a likely fraction of what Ripple paid for legal fees. Meanwhile, Sam Bankman-fried others ran amok while the SEC failed to protect investors. Similar to the SEC v LBRY case, the SEC v Ripple case diverted SEC resources away from the bad actors of the crypto space.
Despite the optimism about the likely final number, the case will drag into the summer of 2024. After the final judgment, investors also expect the SEC to appeal the Programmatic Sales ruling. An appeal could take one year to eighteen months, possibly leaving XRP in limbo until late 2025.
XRP Price Action
XRPUSD 151123 Weekly Chart
XRP held above the 50-day and 200-day EMAs, affirming bullish price signals.
An XRP break above the $0.6354 resistance level would support a move toward the $0.7047 resistance level.
Market sentiment toward the likely outcome of the SEC v Ripple case remains the focal point.
If XRP drops below the $0.60 level, XRP may break below the trend line and the $0.5835 support level.
The 14-day RSI reading of 54.30 indicates an XRP move to the $0.6354 resistance level before entering overbought territory.
XRPUSD 151123 Daily Chart
In the 4-hourly Chart, XRP sits below the 50-day EMA while holding above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.
An XRP break above the $0.6354 resistance level would support a move to the 50-day EMA.
However, failure to break above the $0.6354 resistance level would leave the 200-day EMA in play.
The 4-hourly RSI, with a reading of 37.25, indicates an XRP drop to below $0.6150 before entering oversold territory.