By
Steve Muchoki
May 9th, 2024
Deaton’s perspective aligns with the prevailing sentiment in the cryptocurrency community, which generally regards the proposed $20 million settlement as a favorable resolution for Ripple.
Renowned cryptocurrency attorney John Deaton has provided insights into the ongoing SEC vs Ripple lawsuit, asserting that a settlement amounting to $20 million or less would represent a significant legal victory for Ripple.
In a recent post on X (formerly Twitter), Deaton strongly challenged the notion that the lawsuit’s outcome is a balanced 50/50 situation for the SEC, instead suggesting that it leans heavily in Ripple’s favor, with an approximate 90/10 advantage. Deaton’s comments came after a post from Stuart Alderoty, Ripple’s Chief Legal Officer, highlighting yet another legal setback for the SEC.
The people who’ve argued that the SEC got a 50-50 victory in the @Ripple case are 💯 wrong. It was more like 90-10 in Ripple’s favor. If Ripple ends up paying $20M or less it’s a 99.9% legal victory. https://t.co/Xe6SYBiTCJ
— John E Deaton (@JohnEDeaton1) November 4, 2023
Deaton’s perspective aligns with the prevailing sentiment in the cryptocurrency community, which generally regards the proposed $20 million settlement as a favorable resolution for Ripple. This assessment takes into account the potential ramifications of the XRP lawsuit and the broader regulatory landscape for digital currencies.
Stuart Alderoty’s recent post contributes to the narrative, highlighting yet another setback for the SEC in a series of defeats. According to Alderoty, in the SEC vs. Govil case, the US Court of Appeals for the Second Circuit has determined that the SEC cannot seek a significant disgorgement penalty without first proving real financial harm to “investors”. Essentially, this implies that in the absence of harm, no penalty can be imposed.
Ripple’s Disgorgement Charges
Other crypto lawyers have also shared their views on how much Ripple needs to pay as disgorgement charges.
Over the weekend, Jeremy Hogan, an attorney and partner at Hogan & Hogan, offered his perspective on the SEC vs Ripple case. Hogan focused on the issue of disgorgement, as the SEC aims for a substantial $770 million penalty for the illicit sale of XRP to institutional investors.
Hogan emphasized that the law grants the SEC the authority to pursue disgorgement, interest, and penalties. The disgorgement matter arose in the wake of the court’s decision, which found that around $770 million in XRP sales to institutional investors were in violation of the law.
Hogan presented two different arguments. In the first, he said the SEC v. Liu case in 2020 established that disgorgement is an equitable remedy, implying that it should be just and equitable. In this context, fairness dictates that the disgorgement should represent the net profits resulting from the violations, rather than the gross profits. Therefore, Ripple will be able to subtract its business expenses from the overall total.
In the second argument, he said that as reaffirmed by the 2nd DCA, disgorgement must be granted to those who suffered financial losses, commonly referred to as “victims”. Victims are individuals or entities who incurred losses on their investments. Consequently, if an XRP purchaser acquired the cryptocurrency at $0.30 and its current price is $0.60, they do not qualify as victims, and thus, no case of disgorgement arises.
Hogan emphasized that the SEC has the authority to approximate disgorgement damages and place the responsibility on Ripple to challenge such estimates. “In conclusion, $770 million is NOT going to be $770 million, but something much less,” wrote the lawyer in his concluding note.