Lawyer John Deaton, who is representing XRP (XRP) holders, has made a persuasive case in the United States Securities and Exchange Commission (SEC) vs. Ripple legal saga, suggesting that the anticipated $770 million disgorgement for Ripple is improbable. He grounds his prediction on various influential factors that could sway the court’s judgment.
Deaton underscored the significance of the U.S. Supreme Court’s Morrison ruling, which effectively limits the SEC’s jurisdiction to sales within the United States. This gains relevance as Ripple’s XRP sales in the United Kingdom, Japan, Switzerland and other jurisdictions face scrutiny. Additionally, the legal standing of XRP in these jurisdictions bolsters Ripple’s stance.
I will address this on Tuesday’s @CryptoLawUS livestream. @Ripple will pay a lot less than $770M.— John E Deaton (@JohnEDeaton1) November 11, 2023
The Supreme Court ruled disgorgement is not punitive in nature and cannot exceed “net profits” from the sales. A company can deduct legitimate business expenses. @bgarlinghouse and… https://t.co/jDkOfouj1w
For example, regulatory bodies like the Financial Conduct Authority in the U.K. and the Financial Services Agency in Japan have not categorized XRP as a security. This classification is crucial, as it permits the lawful continuation of XRP sales in these regions, posing a challenge to the SEC’s pursuit of disgorgement from these global transactions.
Additionally, Deaton highlighted that the legal action against Ripple is not centered on fraud but instead constitutes a regulatory disagreement. This differentiation is important as it redirects attention from punitive measures to regulatory adherence. Given that a substantial portion of XRP sales happen outside the U.S. and involve accredited investors, the potential for disgorgement diminishes significantly. Deaton estimates a significant reduction in the potential disgorgement amount by excluding non-U.S. sales, which may constitute over 90% of total sales and sales to accredited investors.
Furthermore, the lawyer highlighted that most institutional XRP sales have not resulted in harm, as the current XRP price exceeds the levels during those sales, indicating a lack of investor losses. Deaton also underscored the rapid nature of On-Demand Liquidity transactions with XRP, occurring within seconds, reducing the potential for investor harm. Interestingly, the accusations of harm are more directed at the SEC than Ripple, particularly among the 75,000 XRP holders participating in the legal action.