The United States Securities and Exchange Commission (SEC) has now obtained a partial victory in a new episode of the litigation it maintains against the company Ripple Labs, responsible for the XRP token. The government agency won a motion requiring the company to disclose its financial statements.
According to a court document, Judge Sarah Netburn accepted the SEC's motion ordering Ripple to disclose its financial information for the years 2022 and 2023, as well as submit to questioning regarding the institutional sale of the XRP asset.
Ripple Labs will also have to file post-lawsuit contracts on institutional sales of XRP and disclose the revenue earned from those trades.
The SEC's motion was fully accepted by Judge Sarah Netburn on February 5, 2024, giving the regulator the ability to know in detail the state of the financial health of the company behind the XRP cryptocurrency.
Judge Netburn's ruling is a continuation of litigation between the SEC and Ripple Labs, which has spanned more than three years. The ongoing dispute seeks to determine whether the XRP token is a security or a commodity.
Judge Analisa Torres ruled in July 2023 that the XRP token, issued by Ripple, was a security when sold to institutional investors and venture capitalists; and was therefore traded illegally because it was not registered.
Now, with the ruling, Judge Sarah Netburn advances in favor of the SEC and orders Ripple to show its audited financial statements. This, after considering that Ripple's objections regarding previous rulings, as well as confidentiality concerns, are not sufficient arguments to avoid financial disclosure.
Ripple Labs' financial statements between 2022 and 2023, contracts and other requested topics are relevant to the ongoing court case. This is because they would allow the US regulator to establish any sanctions against the cryptocurrency company.
However, the SEC argues that the motion to learn about Ripple's financial health only seeks to “address compliance and ensure a fair resolution of the case through the mandatory exchange of relevant information.”
According to Judge Netburn's court decision, the requested information must be presented under a protective order before February 12. It will then be when the court will dictate the appropriate sanctions.
The judge also agreed with the SEC that information about institutional sales of XRP following the complaint is relevant to determining “whether an injunction is necessary and fair.” And in that sense Ripple must also answer questions about the amount of revenue from institutional sales of XRP that he received.
The new ruling in favor of the SEC comes days after the regulator presented the motion before the Southern District Court of New York, in which it requested judicial intervention so that the company delivers its audited financial statements since 2021.
