SEC v. Ripple: Settlement could bottleneck flow of XRP, says expert
The lawsuit between the SEC and Ripple is most likely ending in a pre-trial settlement. 96% of all SEC cases are settled before trial, of which 60% before litigation and 90% in discovery.
As the SEC v. Ripple is expected to provide significant precedent for the crypto ecosystem, the whole industry is watching every new episode of the legal battle.
We have recently covered attorney Jeremy Hogan’s take on the far-reaching consequences of a Ripple win on the Fair Notice defense.
Today, we are reporting Mr. Hogan’s view of what a settlement would look like after reviewing the Kik and Telegram cases and from settling hundreds of cases himself.
First, he conjectured that the SEC will want the language “enjoining” Ripple from any future illegal sales and a civil penalty. Disgorgement should be tricky: “XRP has changed hands millions of times. In other words, there’s just no way to fairly “disgorge” profits to investors because there’s no way of fairly knowing who to ‘disgorge’ to.”
Then, Mr. Hogan pointed to Ripple’s likely priorities: to maintain its business (a penalty or disgorgement must not bankrupt the firm) and clarity moving forward (lawsuit is about past and current sales of XRP).
In his opinion, a settlement agreement between the SEC and Ripple is likely to:
– include Ripple paying a penalty specifically limited to dates pre-lawsuit;
– not include disgorgement of profits to purchasers because of the impossibility of figuring out how to disburse the funds;
– contain a term that includes limitations on the sales of XRP released from escrow.
– satisfy Ripple’s concerns: namely, maintaining its business and ODL.
– give the exchanges the confidence to re-list XRP.
– (possibly) limit sales to private sales to companies and clients, which would bottleneck the flow of XRP into the market for years.
– put XRP in the clear as far as securities violations: Ripple would be the first crypto company to be 100% in the clear.
Jeremy Hogan went into detail on many of the abovementioned points, which can be seen in his published Youtube video.
In the meantime, the SEC has asked the court to “extend the deadlines for both fact and expert discovery by sixty (60) days”.
As admitted by the financial watchdog, “defendants do not consent to the SEC’s request because they contend that the SEC had sufficient time to investigate this matter before filing suit and because Ripple wants to move for summary judgment as soon as possible.”
In addition to this SEC’s request, both parties have filed a joint motion to extend the time until June 9, 2021, to meet and confer regarding document redactions and sealing of certain exhibits hoping “to avoid burdening the Court with unnecessary disputes”.
In its turn, Ripple filed a motion to compel the SEC to turn over internal documents regarding cryptocurrencies BTC, ETH, and XRP. This motion follows the SEC refusal to produce the documents despite the Judge’s insistence. It should be noted that the Judge can order monetary sanctions or even dismiss the lawsuit for discovery violations.
A few days ago, the court denied the SEC’s motion to compel Ripple to produce memos discussing XRP sales with the firm’s lawyers – a motion that Ripple Labs argued went against the rules of attorney-client privilege. This was an important win for Ripple.