I wanted to share my thoughts on the latest developments about the Ripple XRP v. SEC lawsuit. Many of us know this case has been dragging on for over three years. It is finally in its trial phase. This case swings for the fences; the SEC has recommended that it would take a $2 billion fine against Ripple. Meanwhile, Ripple's lawyers believe an appropriate fine would not exceed $10 million, and here's why I feel their case holds water.
source
To begin with, I want to focus on the SEC penalty of $2 billion. The figures are so huge and disproportionate to the alleged violations. The SEC felt that Ripple proceeded to sell its XRP token through an unregistered securities offering. While I recognize regulation and the enforcement of the rule of law in the crypto space, the penalty is too excessive when considering other cases. The Chief Legal Officer for Ripple, Stuart Alderoty, believes that this penalty is way too high and whose fine would be a more appropriate $10 million in penalties.
The comparison to the Terraform Labs case that Ripple makes is quite compelling. For its fraudulent activities, the Terraform Labs earlier this year agreed to pay a $4.47 billion fine. Of this amount, $3.6 billion was disgorgement, the prejudgment interest was $466 million, and the civil penalty was $420 million.
Ripple's attorneys point out that the SEC has accepted, in other cases, fair civil penalties amounting to only 0.6% to 1.8% of a defendant's gross revenues. Consistent with this, Ripple's proposed penalty of $10 million is appropriate.
Also, one has to consider the nature of the allegations brought against Ripple. Whereas Terraform Labs was found liable for orchestrating one of the largest securities frauds in U.S. history, Ripple does not face direct fraud allegations. That makes a difference because the distinction shows that the severity level between the two cases is not on the same level. Ripple's lawyers argue that, in the absence of direct charges of fraud, the penalty should be considerably lower. As the legal case creates uncertainty in the crypto market, Ripple's CEO, Brad Garlinghouse, hopes that the case ends at summer's closure. He admitted that the resolution of the event may be issued even before September 21st, that is, technically, at the end of summer. American lawyer Jeremy Hogan is sharing his optimism about the ending of the case with a $100 million settlement.
Compared to Ripple's $10 million proposal, this is much, but it is way lower than what the SEC was requesting, $2 billion.
This year, Ripple has won three cases in court partially, and it has reviewers positively reflected on the price of XRP. Since its first victory, investors experienced a relief hope in the company's assets as well. A clear win of Ripple or even an average settlement may bring about XRP's significant rally. This is particularly refreshing for those of us who have invested in XRP and have long-term aspirations for the project.
The legal process is also complicated and slow, with the delays and the appeals from both sides extremely probable. However, all the indications are that this case will end much sooner than later. Ripple arguments hold water, and the case of Terraform Labs serves as a good comparison for the proposed fine of $10 million. The reason that Ripple has not been accused of direct fraud means that the fine should be substantially lower.