In an unexpected twist, Ripple, the pioneering financial technology company, has decided to withdraw from its proposed acquisition of Fortress Trust, just 20 days after the initial announcement. Meanwhile, against the backdrop of an ongoing legal battle and mounting regulatory scrutiny, Stuart Alderoty, Ripple's Chief Legal Counsel, took to social media to deliver a subtle yet impactful comment directed at Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC).
Ripple Abandons Fortress Trust Acquisition Amidst Security Incident
In a recent turn of events, Ripple, the prominent financial technology firm, has announced its decision to abandon the proposed acquisition of Fortress Trust. This decision comes less than three weeks after the initial announcement of the acquisition, which was intended to bolster Ripple's licensing capabilities in the United States.
Ripple CEO Brad Garlinghouse took to X (formerly Twitter) yesterday to deliver the unexpected news. Garlinghouse stated, "We've since made the decision not to move forward with an outright acquisition," though Ripple will continue to hold a stake in Fortress Trust's parent company, Fortress Blockchain Technologies.
The initial acquisition announcement, made on 8 September 2023, had taken both the industry and even Ripple's own employees by surprise. The announcement had also outlined Ripple's plans to invest in various other companies within the Fortress Group, including affiliated firm FortressPay.
However, just days after the initial revelation, Fortress Trust disclosed that the acquisition had been expedited due to a security incident involving a third-party analytics vendor. In an interview with Fortune, Fortress CEO Scott Purcell revealed that the company had suffered losses ranging from $12 million to $15 million as a result of the attack. These losses primarily consisted of Bitcoin, with smaller amounts in USD Coin (USDC) and Tether. Ripple, which had been an investor in Fortress since its seed round in 2022, had stepped in to compensate affected customers and cover the losses.
Purcell, in response to the cancellation of the merger, downplayed its significance, stating, "It is not a big deal." He clarified that the change in plans was unrelated to the security incident and emphasized that Ripple remained an investor and partner in Fortress. "Nothing changes there," he noted.
As Ripple continues to engage in a high-profile legal battle with the United States Securities and Exchange Commission, the failure of the Fortress Trust acquisition could have ripple effects benefiting other companies associated with Fortress.
One such beneficiary could be Swan Bitcoin, which is currently collaborating with BitGo on a joint venture to establish a Bitcoin-only trust company in the U.S. This venture is pending regulatory approval and, notably, Fortress Trust provides custody of records for Swan. With the collapse of the Ripple deal, Swan's involvement in Ripple's business operations in the United States will no longer be on the table, potentially altering the landscape for these companies in the rapidly evolving cryptocurrency sector.
Ripple's Legal Counsel Takes Subtle Jab at SEC Chair Gensler
Meanwhile, in the midst of ongoing legal battles and regulatory scrutiny, Stuart Alderoty, the Chief Legal Counsel at Ripple, took to social media to make a subtle but pointed comment about Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC). Alderoty's X post was in response to a segment of Gensler's recent testimony before the U.S. House Financial Committee.
On Wednesday, Gary Gensler appeared before the House Financial Committee to provide testimony on a range of matters under the SEC's jurisdiction. During this session, lawmakers raised concerns about the SEC's approach to cryptocurrencies and questioned whether the agency's regulatory actions were stifling innovation and investment in the United States.
One particular exchange caught the attention of Ripple's senior lawyer, Stuart Alderoty. Representative Torres challenged Gensler on the concept of an "investment contract," a crucial element in evaluating the SEC's authority over cryptocurrencies. Torres pointed out that Gensler appeared to struggle with basic questions, such as whether an investment contract necessitates an actual contract. The lawmaker's questioning led to what Alderoty described as "deafening and damning" evasions by Gensler.
In a particularly memorable moment, Torres posed a hypothetical question to Gensler, asking whether purchasing a tangible Pokémon trading card could be considered a securities transaction. Gensler seemed taken aback by the question, and Alderoty praised Torres for his adeptness in grilling the SEC chair, quipping that Gensler "didn't know what hit him until it was too late."
Alderoty's post followed a statement he made a day before Gensler's testimony, where he expressed his expectations for the hearing. He anticipated that Gensler would assert the existence of a "crypto asset securities market" and claim that tokens themselves are investment contracts. True to Alderoty's prediction, during his testimony, Gensler referred to the cryptocurrency market as the "crypto asset securities market" and reiterated his position that most cryptocurrency assets meet the criteria of the "investment contract" test, commonly known as the "Howey Test."
This exchange between Ripple's legal counsel and the SEC chair highlights the ongoing tension and debate surrounding the regulation of cryptocurrencies in the United States, as well as the differing viewpoints held by industry players and regulators on this evolving and complex issue.
At press time, data from CoinStats indicated that Ripple’s native token, XRP, was trading hands at $0.508744. This was after the remittance token posted a 2.36% gain over the past 24 hours. This latest increase in price was not enough, however, to bring XRP’s weekly performance out of the red zone. Subsequently, the altcoin’s price was still down 0.92% over the past 7 days.
Price chart for XRP (Source: CoinStats)
Not only did XRP strengthen against the Dollar, it was also able to achieve a gain against the market leader Bitcoin (BTC) throughout the past day of trading. At press time, CoinStats indicated that XRP was up 0.31% against BTC. This meant that 1 XRP token was estimated to be 0.00001886 BTC.
Daily chart for XRP/USDT (Source: TradingView)
A symmetrical triangle had formed on XRP’s daily chart over the past few months. Meanwhile, the altcoin’s price had broken out of this breakout pattern in the past 72 hours. This suggests that XRP may enter into a strong move towards the upside in the short term. Should this bullish thesis be validated, the remittance token’s price may soon flip the $0.5165 resistance level into support. Thereafter, continued buy support may push the cryptocurrency’s price to $0.5670.
On the other hand, if the cryptocurrency’s price falls back to within the symmetrical triangle chart pattern then it may drop towards the immediate support level in the following few days. In this bearish scenario, XRP could retest $0.4585.
Disclaimer: Coinpaper does not recommend that any cryptocurrency should be bought, sold, or held by you. Always conduct your own research and consult your financial advisor before investing in any digital asset.