April 14, 2024

According to U.S.-based attorney Fred Rispoli, Ripple discounted XRP sales to institutional buyers must have significantly contributed to its low price.

Here is Why XRP Price Remains Low, Legal Expert Reveals

Rispoli’s analysis stems from the latest U.S. Securities and Exchange Commission (SEC) remedies filing in the long-standing Ripple vs. SEC lawsuit. 

The SEC seeks a $2 billion fine from Ripple for its alleged breach of securities laws regarding XRP sales to institutional investors.

The SEC’s Allegations and Ripple Defense

In context, the SEC alleges that Ripple engaged in favoritism when selling XRP to institutional buyers, allowing some institutions to purchase the cryptocurrency at significantly lower prices than others. 

The regulator claims that Ripple failed to disclose adequate information regarding these discounted sales. This resulted in some investors buying XRP at higher prices while others acquired it at much lower rates.

The SEC argues that if Ripple had registered its sales, it would have been required to be more transparent about the pricing discrepancies. So, the agency views Ripple’s actions as harmful to investors who purchased XRP at higher prices, and it seeks a $2 billion fine as a remedy for this alleged breach.

Ripple’s executives, including CEO Brad Garlinghouse and Chairman Chris Larsen, have dismissed the SEC’s proposed fine as outrageous. 

The company is expected to file a brief reply to the SEC’s motion next month, addressing the allegations and presenting its defense.

Rispoli suggests that if the discounts offered to certain institutions were substantial enough, these entities may have acquired XRP at extremely low prices. 

As a result, they could be responsible for large sell-offs or “dumps” whenever XRP attempts to rally, effectively suppressing the cryptocurrency’s price movements.

The legal expert expressed concern about the potential negative impact of Ripple’s actions on the company’s reputation and the XRP price. 

While acknowledging that the situation may not be as severe as it appears, Rispoli stated that Ripple’s selling of XRP at discounted prices could be a significant reason why the token’s price remains low.

Exit Liquidity for Institutions, Holding the Bag for Retail Investors

Rispoli speculates that if the discounted sales were substantial, the institutions that acquired XRP at extremely low prices might be looking to take profits on any rally, further compounding selling pressure. 

In such a scenario, retail investors holding onto their XRP bags in anticipation of a substantial price increase could serve as exit liquidity for these institutions.

However, it’s important to note that the situation remains uncertain. Moreover, Ripple will soon present its side of the story and make sense of the allegations through its upcoming brief reply.

The SEC’s motion also suggests that Ripple persisted in its XRP sales after the agency filed its complaint and after the summary judgment. 

However, Ripple has contended that its post-lawsuit sales, particularly those related to its On-Demand Liquidity (ODL) product, took on a different nature from the previous sales to institutions.

Rispoli notes that Ripple would need to sufficiently prove this position to defend itself against the SEC’s allegations.

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