Well-known attorney John Deaton recently weighed in on the ongoing United States Securities and Exchange Commission (SEC) vs. Ripple lawsuit, shedding light on the potential legal outcomes. Deaton suggests that if Ripple manages to settle for $20 million or less, it would mark a substantial legal victory for the company. This perspective challenges the notion that the SEC’s position in the case is stronger than it appears.
Deaton’s insights emerged in response to a tweet by Stuart Alderoty, Chief Legal Officer at Ripple, celebrating another setback for the SEC in their ongoing legal battles. Alderoty highlighted a recent development in the 2nd Circuit regarding the SEC’s ability to seek a hefty disgorgement award, emphasizing that proof of actual financial harm to investors is a prerequisite.
SEC vs. Ripple: Attorney Jeremy Hogan’s Complex Insights
Adding another layer to the discussion, attorney Jeremy Hogan offered his perspective on Deaton’s tweet. Hogan pointed out the situation’s complexity for both Ripple and the SEC, delving into the legal mechanisms at play.
One crucial aspect is disgorgement, a remedy that involves taking away illicit profits from the rule-breaking party, in this case, Ripple. The recent court ruling held that approximately $770 million in XRP sales to institutional investors were improper. Ripple’s arguments pivot on the principles of fairness, citing the SEC v. Liu case (2020) to emphasize that disgorgement should account for net profits, excluding business expenses.
Furthermore, the concept of “victims” plays a crucial role in determining whether disgorgement is warranted. If XRP purchasers haven’t incurred financial losses and have instead profited from their investments, disgorgement may not apply.
According to Hogan, a notable observation made during this legal battle is the rarity of the SEC suing a company for selling unregistered security while the value of the “security” increases. This rarity may imply that XRP is not a security, a contention that has garnered significant attention.
The jurisdiction question also looms large. The SEC must demonstrate a nexus between the purchasers of XRP and the United States to establish its authority over the sales.
Hogan argued that in the coming year, parties involved will be vigorously debating these issues, and the $770 million figure may undergo substantial adjustments. The intricacies of the damage-related aspects of this lawsuit are now better understood, setting the stage for a contentious legal battle in 2024.
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