XRP holds gains as attorneys debate relevance of discounts offered to Ripple’s institutional clients

The SEC calls for legally mandated repayment of gains from discounts offered by Ripple to institutional clients.
Ripple offered different discounts to institutional clients, the SEC expects the firm to pay back “ill-gotten gains.”
XRP consolidates and sustains above $0.50 on Wednesday.

Ripple (XRP) price consolidates in a tight range around $0.50 on Wednesday as the Securities and Exchange Commission (SEC) legal battle against payment-remittance firm Ripple intensifies with two key issues in focus this week.

The first issue is the fines to be imposed on the payment firm for alleged violations of securities laws by sale of XRP to institutional clients. The second is the issue of “disgorgement” or ill-gotten gains from different discounts offered to Ripple’s institutional clients.

Daily Digest Market Movers: Ripple’s alleged “ill-gotten gains” take center stage in lawsuit discussion

Pro-crypto attorneys behind the X handle James Murphy, known as @MetaLawMan, and Bill Morgan, as @Belisarius2020, are debating the SEC’s stance on Ripple’s gains from offering different discounts to institutional clients.
The regulator considers these “ill-gotten gains” and asks for mandated repayment of the disgorgement in their recent lawsuit filing.
The SEC’s proposal had asked the court to order Ripple Labs to pay $876 million in disgorgement, alongside $198 million in prejudgment interest and a civil penalty of $876 million.
The fines amount to a total of $1.95 billion.

have a listen. The SEC wants to make Ripple ‘s sophisticated institutional customers richer at Ripple’s expense by the remedy of disgorgement. This is just one anomaly of many of this crazy lawsuit that is literally protecting nobody. https://t.co/pSwrURfxAB
— bill morgan (@Belisarius2020) May 14, 2024

Ripple asked to seal the discounts offered to its institutional clients to protect its interest, in the recent Omnibus letter motions filed on Monday.
There is no fixed date for the court’s ruling on the penalty to be imposed on the firm.

Technical analysis: XRP sustains above $0.50, likely to decline

Ripple price is in a state of decline since last week as XRP wiped out nearly 13% of its value since the May 6 high of $0.5703. XRP has sustained above support at $0.50 since then, however, the Moving Average Convergence Divergence (MACD) indicator shows negative momentum in the altcoin’s price trend.

The red histogram bars below the neutral line and the crossover of the signal line above MACD on Sunday support a bearish narrative for XRP.

Relative Strength Index (RSI) reads 40.72, still far from oversold levels and leaving more room for a further decline.

XRP could sweep support at $0.4717, the 23.6% Fibonacci retracement of the decline between the April 9 top of $0.6431 and the April 13 bottom of $0.4188. This would mark a nearly 6% correction in Ripple price from current levels.

XRP/USDT 1-day chart

Looking up, a daily candlestick close above $0.5045, the 38.2% Fibonacci retracement of Ripple’s decline between April 9 and April 13, could invalidate the bearish thesis. XRP could rally towards the resistance at $0.5310, the 50% Fibonacci retracement of the aforementioned movement.

SEC vs Ripple lawsuit FAQs

Is XRP a security?

It depends on the transaction, according to a court ruling released on July 14: For institutional investors or over-the-counter sales, XRP is a security. For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.

How does the ruling affect Ripple in its legal battle against the SEC?

The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token. While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.

What are the implications of the ruling for the overall crypto industry?

The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at. Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say. Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.

Is the SEC stance toward crypto assets likely to change after the ruling?

The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation. While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.

Can the court ruling be overturned?

The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.

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