XRP Crashes Despite Bitwise ETF Filing Due to SEC Appeal in Ripple Case

XRP is taking a tumble amid the US Securities and Exchange Commission (SEC) appealing a judge's ruling against Ripple.

In a "notice of appeal" to the Second Circuit Court of Appeals, the SEC pushed back against Judge Analisa Torres's ruling from two months ago.

Ripple was fined $125 million in early August, which CEO Brad Garlinghouse described as a “victory for Ripple.” 

The figure was just a sliver of what the Ripple community had potentially faced. Initially, the regulator sought $1 billion in disgorgement and prejudgment interest and $900 million in civil penalty.

Instead, Judge Torres ordered Ripple to pay $125 million in civil penalties and imposed an injunction against future securities law violations. Torres found that 1,278 institutional sale transactions by Ripple violated securities law.

Dating back to a 2020 lawsuit, the SEC had accused Ripple of conducting an unregistered securities offering worth $1.3 billion by selling XRP.

Judge Torres has not yet approved Ripple's request to delay the payment. An appeal would mean that the 2020 case is not yet over. Either party has 60 days to file an appeal.

In a statement yesterday, an SEC spokesperson said, "We believe that the district court decision in the Ripple matter conflicts with decades of Supreme Court precedent and securities laws and look forward to making our case to the Second Circuit."

Garlinghouse hit back on X, stating, "If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC."

"Somehow, they still haven't gotten the message: they lost on everything that matters. Ripple, the crypto industry, and the rule of law have already prevailed."

Ripple Chief Legal Officer, Stuart Alderoty, described the SEC's decision to appeal as "disappointing but not surprising."

"Instead of faithfully applying the law, this agency, under this Chair, continues to engage in litigation warfare against the industry," he continued.

News of the SEC's appeal sent XRP's price spiralling below $0.55, after just reaching highs of $0.64 on Monday.

Bitwise Files XRP ETF

The appeal comes as Bitwise files for an XRP exchange-traded fund (ETF). On Wednesday, the asset manager submitted its initial registration statement on Form S-1 with the SEC. Per the filing, the proposed fund would hold XRP directly.

"At Bitwise, we believe blockchains will usher in new, apolitical monetary assets and permissionless applications for the 21st century,” said Bitwise CEO Hunter Horsley. “It’s why for the past seven years we’ve helped investors access the opportunities in the space, and we’re excited to continue that work with our filing for a Bitwise XRP ETP.”

The move follows Bitwise registering a trust entity named "XRP ETF" in Delaware on Tuesday.

However, the S-1 form on its own is meaningless and must be followed by a 19b-4 form. Unlike the 19b-4 form, which the SEC must respond to within a specific time frame, there is no such requirement for the S-1 form, meaning the SEC has no urgency to approve or deny it. This could result in the agency delaying Bitwise's application for years.

SEC Director Steps Down

In other SEC-related news, SEC Enforcement Director Gurbir S Grewal is stepping down after 21 years, paving the way for Sanjay Wadhwa, the division’s deputy director, to take his place.

“Every day, he has thought about how to best protect investors and help ensure market participants comply with our time-tested securities laws. He has led a Division that has acted without fear or favor, following the facts and the law wherever they may lead. I greatly enjoyed working with him and wish him well,” SEC Chair Gary Gensler said in a statement. 

Grewal, who will step down on 11 October, filed cases against a number of crypto firms including Coinbase, Kraken, Binance, and Ripple. Over 100 enforcement actions against crypto firms were filed under Grewal's tenure.