Recently, in the ongoing legal battle between Ripple and the SEC, cryptocurrency expert Zach Rector revealed a startling scenario that could result in the company paying billions of dollars in fines to the SEC.
Potential $3 Billion Disgorgement For Ripple
Financial expert Zach Rector shared his analysis of the Ripple Vs. SEC dispute on YouTube. He suggested that Ripple could potentially pay over $3 billion in penalties to the SEC for violating federal securities law through its institutional sales of XRP.
According to Rector, the worst-case scenario for Ripple would be if Judge Analisa Torres rules that XRP sales were investment contracts, resulting in a fine of $3 billion to $3.5 billion to the SEC.
Rector pointed out that the SEC claimed Ripple had sold about $3 billion worth of XRP since the lawsuit was filed, and had also sold unregistered securities in 2013 to raise $1.3 billion. However, Judge Analisa Torres ruled that Ripple’s programmatic sales and other distributions of XRP do not operate under unregistered securities, significantly lowering the amount to $777 million.
Rector expects Ripple to appeal in the second circuit if Judge Torres rules that ODL sales were investment contracts. He also claimed that the company’s attorneys would have confirmed that sales connected to ODL could not be considered securities.
Rector also argued that customers buying XRP for ODL do not expect to profit from Ripple’s efforts, speculating that if Torres ruled ODL sales were securities, Ripple would file an appeal.
Rector addressed the claim that Ripple would not be able to sell XRP again if they paid the fine, stating that this notion is incorrect, as the company could still carry out every aspect of XRP sales.
Significance Of The Discovery Phase
The SEC Vs. Ripple legal dispute is currently in the remedies, with the lawsuit’s remedies aspect in the discovery phase.
The SEC filed a motion last week, requesting Ripple to provide two critical documents and respond to an interrogation. The documents cover Ripple’s post-complaint contract regulating its institutional sales of XRP and its audited financial statements from 2022 to 2023.
Ripple is expected to respond to the SEC’s request by January 19, and will likely oppose the request.
Meanwhile, the SEC’s final move in the remedies proceeding is scheduled for April 29, 2024, after which the court will make a decision regarding the remedies.
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