If the Ripple vs. SEC case controversies and legal setbacks weren’t enough for the SEC, they would have embroiled the XRP community again with raging penalty charges. SEC v. Ripple will move on to the remedies phase shortly. A hearing to establish the proper sanction for Ripple’s illegal sales of $770 million worth of XRP to institutional investors is forthcoming.
Now the cards are open, Ripple and the U.S. Securities and Exchange Commission (SEC), the upcoming “remedies phase” is poised to be a pivotal juncture. The decisive moment will determine the fine Ripple must pay for purportedly breaching securities laws by conducting XRP sales worth $770 million to institutional investors.
What Ripple Can Do?
Stuart Alderoty, Ripple’s CLO, highlighted the SEC’s recent defeat in the Aaron Govil case. The Second Circuit ruled that the SEC must demonstrate genuine financial harm before seeking disgorgement from the defendant. It will be fascinating to see how the Second Circuit rules in the Govil litigation.
In light of the verdict, the SEC’s case against Ripple may suffer another setback during the remedies phase. The SEC must show that investors suffered actual financial injury before demanding disgorgement from the defendant, and this is where the case turns. This demonstrates the principle of “no harm, no foul.”
One strategy Ripple might employ is to seek exemptions for specific categories of XRP sales, particularly those associated with On-Demand Liquidity (ODL), as well as other legitimate business expenses from the total fine. This approach reflects Ripple’s efforts to distinguish between various types of XRP transactions.
Legally not an Easy Task for SEC, Experts say
As the case nears its outcome, analysts have mixed views on the phase and its consequences. Some legal experts speculate that the SEC might push for a substantial portion of the $770 million in sales as a penalty. Their perspective aligns with the regulatory agency’s strong stance on enforcing securities regulations. However, there is an opposing view that Ripple could successfully negotiate a significant reduction in the fine during the remedies briefing.
Pro-XRP legal experts, including prominent figures like Jeremy Hogan and Bill Morgan, have weighed in on the implications of this Second Circuit decision. Hogan noted that Ripple is currently in the “damages” phase, emphasizing that the SEC must substantiate financial losses suffered by XRP holders for Ripple to be held liable. Morgan raised pertinent questions about the evidence the SEC possesses to support its assertion that XRP institutional investors experienced actual financial harm.
And The Consequences..
If Judge Analisa Torres aligns with the Second Circuit decision in the Govil case, the SEC’s case against Ripple could face another setback. This development follows earlier victories for Ripple, including the determination that XRP is not a security and the rejection of the SEC’s request for an interlocutory appeal.
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