Prominent crypto lawyer John Deaton believes that recent developments in the SEC vs Ripple Labs legal battle have turned the tides in favor of the XRP developer. He said that a settlement of $20 million or less would constitute a significant legal triumph for the company over the US Securities and Exchange Commission.
Last week, Ripple’s chief legal officer Stuart Alderoty went on X to announce that the SEC suffered yet another defeat as the US Court of Appeals for the Second Circuit ruled that the securities watchdog could not request a substantial disgorgement award without first proving that investors actually suffered financial losses from investing in XRP.
Court Rules SEC Cannot Impose Penalties on Ripple If Unable To Prove Investor Losses
Basically, the ruling implies that if there is no financial harm to investors, then there is no penalty. The crypto community is currently debating whether Ripple will accept the settlement terms and agree to pay the $130,000 fine that was imposed by the SEC for causing significant losses to investors.
Reacting to Stuart’s post, the pro-XRP lawyer strongly refuted the idea that the lawsuit’s result would be an even 50/50 outcome for both parties. Deaton claimed that it was more like a 90-10 advantage in favor of Ripple. He also declared that if Ripple ends up paying $20 million or less in fines, it will be considered a “99.9% legal victory”.
The uncertainty surrounding the legal status of XRP and other digital currencies has led to many in the industry closely following the developments in the case.
Ripple vs SEC
The SEC initiated its lawsuit against Ripple Labs in December 2020, alleging that the crypto company conducted an unregistered securities offering by selling its native blockchain token, XRP, directly to retail and institutional investors to raise capital.
Since then, however, the case has swung in Ripple’s favor, with Judge Analisa Torres ruling in July that XRP was not a security when offered through a cryptocurrency exchange and could only be considered so if the token was sold to institutional investors directly by the company. The Judge has also approved an order regarding the SEC and Ripple’s joint request to propose a briefing schedule to address the institutional sales of XRP.
Ripple Would Win the Case If It Can Avoid Accountability for Investors’ Loss
Legal analyst Jeremy Hogan pointed out a critical factor that may have moved the case in favor of Ripple, which is based on whether XRP investors suffered any monetary loss from purchasing the cryptocurrency. According to his analysis, Ripple may evade any claims of financial damage by investors if they had purchased the tokens at a lower price. A major disadvantage for the SEC in this scenario is that Ripple can avoid any accountability for investor loss, which means a favorable settlement deal is on the way for the XRP issuer.
The market is mainly focused on the SEC’s penalties against Ripple Labs. Based on a commentary related to the case, the Securities and Exchange Commission is seeking a $770 million penalty for the alleged institutional sale of XRP, which the agency has been unable to enforce on Ripple Labs due to a lack of evidence. Moreover, legal experts suggest that it could be an unforeseen development in the case that is also in favor of Ripple as its investors haven’t been affected significantly.
Judge Torres has instructed both the SEC and Ripple Labs to provide a joint briefing schedule on November 9, after the trial commences.
The case serves as a catalyst for implementing a broader regulatory environment over digital currencies as the crypto sector continues to navigate evolving rules and regulations worldwide.
The latest development saw XRP make massive gains over the weekend. At the time of writing, Ripple (XRP) is trading at $0.679 – rising 9.4% in the last 24 hours. The token’s market value surged by over 20% in the past week.