In a recent turn of events regarding the Ripple Vs. SEC lawsuit, a cryptocurrency expert known as Zach Rector has revealed a shocking scenario that could lead to the firm paying billions of dollars in fines to the United States Securities and Exchange Commission (SEC).
Potential $3 Billion Disgorgement For Ripple
The well-known financial expert shared his analysis regarding the Ripple Vs. SEC legal dispute on YouTube on Monday. Rector claims that the payment company might pay over $3 billion as penalties to the SEC for breaking federal securities law as a result of its institutional sales of XRP.
According to the expert, “the worst case scenario for the firm is if Torres rules XRP ODL sales were investment contracts.” This will result in the firm paying a fine of “$3 billion to $3.5 billion” to the SEC.
Rector pointed out that the regulator asserts that since suing the firm in December 2020, Ripple has sold about $3 billion worth of XRP. In addition, the SEC also argued that at the onset of the lawsuit, the company sold unregistered securities in 2013 to raise $1.3 billion.
However, after Judge Analisa Torres ruled that Ripple’s programmatic sales and other distributions of XRP do not operate under unregistered securities, the amount was substantially lowered to $777 million.
Rector specifically anticipates that Ripple will launch an appeal in the second circuit if Judge Torres makes the ruling that ODL sales were investment contracts. He claimed that the company had to have received confirmation from its attorneys that sales connected to ODL could never be considered securities.
He also asserted that customers buying XRP for ODL do not anticipate profiting from the payment company’s labor. Thus, he conjectured that if Torres ruled that XRP sales connected to ODL were securities, Ripple would have to file an appeal of the decision.
In the YouTube video, Rector addressed the claims that Ripple will never be able to sell XRP again if they eventually pay the fine. He stated that the notion is “incorrect,” as the firm could still carry out every aspect of XRP sales.
Significance Of The Discovery Phase
So far, the SEC Vs. Ripple legal dispute is presently in the remedies, and Rector highlighted that the lawsuit’s remedies aspect is in the discovery phase.
The US regulator filed a motion last week, which requires the company to turn over two important papers and reply to an interrogation. The documents requested by the SEC cover Ripple’s post-complaint contract that regulates its institutional sales of XRP and its audited financial statements from 2022 to 2023.
However, Ripple is anticipated to submit its response to the SEC’s request on January 19. The payment platform’s next motion will be in opposition to the request.
Meanwhile, the SEC will file the final move in the remedies proceeding on April 29, 2024. Then, the court will decide regarding the remedies.
Featured image from iStock, chart from Tradingview.com