The SEC loses again in court
The SEC loses in court again
The SEC originally filed the lawsuit in 2021, accusing businessman Aron Govil of duping investors in two companies he controlled, Cemtrex and Telidyne. The allegations also included that Telidyne falsely claimed to be developing mobile applications that would facilitate cryptocurrency transactions and help in the fight against the coronavirus. The US Securities and Exchange Commission went to court to demand a fine and additional compensation.
But the latest decision by the 2nd Chamber of the US Court of Appeals, which was announced on Friday (November 4th), puts a severe damper on the SEC. The court ruled that the U.S. Securities and Exchange Commission could not seek compensation from the defendant without proving actual financial loss to investors.
This legal setback was grist to the mill for Ripple, a company already embroiled in a heated legal battle with the SEC. Stuart Alderoty, Ripple’s general counsel, commented on the latest defeat with a mocking tone: “Another loss for the SEC this week… The streak continues.”
Is Ripple celebrating now?
The legal battle between the US Securities and Exchange Commission and Ripple centers on the classification of XRP, Ripple’s cryptocurrency . A previous ruling in the case ruled that XRP is not considered a stand-alone investment contract. However, it excluded institutional sales of XRP from this decision and considered it an investment contract.
Given this latest ruling in the Govil case, some legal experts fear that the U.S. Securities and Exchange Commission could suffer another defeat in the settlement phase of the case. The focus of this agreement is the question of possible compensation payments by Ripple. But the SEC faces a complex task: institutional XRP investors must prove that they actually suffered a financial loss in order to receive compensation.
Ripple sold $770 million worth of XRP to institutional investors. Legal experts are now speculating that in the settlement phase of the case, the SEC could try to make Ripple pay a significant portion of this sale as a penalty. The legal dispute between the US Securities and Exchange Commission and Ripple remains exciting and raises many questions that the crypto and financial markets are closely following.