The Ripple Effect: How Legal Strategies Could Deflate the SEC's $770 Million Claim

The Ripple-SEC Showdown: A Legal Odyssey 

The legal tussle between Ripple Labs and the SEC commenced in December 2020, when the SEC filed a lawsuit against the blockchain company. The allegation was that Ripple had engaged in an unregistered securities offering through the sale of its digital asset, XRP. Over the course of this legal battle, several pivotal developments have shaped the narrative.

On a side note, how rare is it that the SEC sues a company for selling an unregistered security and during the litigation the price of the "security" increases?

Very rare. And that might be another indication that the "security" is...not a security.

But I digress.

— Jeremy Hogan (@attorneyjeremy1) November 5, 2023

A Turning Point: XRP's Security Status 

A significant turning point in the case came with a decision by Judge Analisa Torres. She ruled that XRP, when traded on secondary markets, should not be categorized as a security. This ruling, coupled with a reduction in the charges against Ripple executives, marked a pivotal moment in the ongoing legal saga.

The Ripple Defense Strategy 

Ripple's legal team, spearheaded by chief lawyer Stuart Alderoty, has strategically used recent legal precedents to their advantage. Notably, they pointed to the Second Circuit ruling in SEC v. Govil, which emphasized that the SEC must demonstrate actual financial harm to investors before seeking substantial disgorgement. This precedent underscores Ripple's position that the extent of their liability may hinge on whether XRP investors have indeed suffered losses.

Hogan's Legal Insights: A Game-Changer 

Jeremy Hogan's insights have added another layer of intrigue to this legal drama. He suggested two key strategies that Ripple could employ to chip away at the SEC's colossal penalty claim.

Firstly, he argued that the SEC's demand for "disgorgement" should be calculated based on Ripple's net profits rather than total revenue. By factoring in business expenses, this could substantially reduce the amount demanded by the SEC.

Secondly, Hogan raised questions about the SEC's jurisdictional reach, emphasizing that it is limited to U.S. soil. He posited that only those sales of XRP with a U.S. connection might fall under the SEC's purview. This narrowing of the case's scope could significantly impact the associated penalties.

The Road Ahead: A Briefing Schedule 

The most recent development in the Ripple-SEC saga saw Judge Torres granting an order for the SEC and Ripple to propose a briefing schedule regarding the institutional sales of XRP. This aspect of the lawsuit pertains to allegations that Ripple breached securities laws. Both parties have been instructed to submit their joint briefing schedule by November 9.

As the Ripple-SEC legal drama continues to unfold, the crypto community watches with bated breath. With Jeremy Hogan's legal insights and the recent turn of events, Ripple may be on the brink of a significant victory. If successful, their legal strategies could drastically reduce the SEC's $770 million claim, setting a precedent that could shape the future of cryptocurrency regulation in the United States and beyond. The outcome of this legal battle could redefine the landscape for digital assets and the way they are governed by regulatory authorities.

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