Ripple V SEC: Deaton Speaks on Potential Settlement, Remedies, and Appeal

Attorney John Deaton, a pro-XRP lawyer and founder of Crypto-Law, has issued fresh comments regarding the ongoing SEC v. Ripple lawsuit.

In a 22-minute live broadcast yesterday, Attorney Deaton asserted that there are no ongoing discussions about a settlement between the SEC and Ripple.

No Ongoing Settlement Discussion

He made the assertions based on the SEC’s recent motion to compel Ripple to produce its audited financial statements from 2022 – 2023 and post-complaint contracts governing institutional sales.

“I don’t think there are any talks for a settlement. This is still scorched earth litigation even in the remedies stage,” Deaton said.

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Settlement Can Happen Later

Despite stating that the SEC and Ripple are not currently engaged in a settlement discussion, Deaton did not rule out the possibility of the case ending in a settlement.

According to Deaton, the settlement can still happen in the future. Additionally, he pointed out that the SEC can still initiate a settlement if it believes it can get more from Ripple through a settlement than from what the judge could rule.

“Maybe that will make them (SEC) come to the table because they can spin it versus getting another ruling that embarrasses them as an organization. I’m not saying a settlement can’t or won’t happen. I’m just telling you it’s not happening today,” he added.

Ripple has always mentioned that it is open to settling with the SEC as long as the regulator provides clarity for XRP. However, the commission has not shown signs of agreeing to settle with Ripple.

Ripple Could Pay a Lower Fine Than What It Spent on Legal Fees

The lawsuit is currently in the remedies stage, where the court will determine the appropriate fine Ripple would pay for its institutional sales violation. It is worth noting that this violation involves the sale of over $700 million worth of XRP to institutional clients.

With the SEC requesting Ripple’s audited financial statements and post-complaint contracts, there are speculations that the SEC wants to include other institutional-related XRP sales that took place after the complaint was filed on December 22, 2020.

However, Deaton said the SEC’s biggest fear is Ripple showing an exemption to the vast majority of those institutional sales.

Per Deaton, Ripple can demonstrate that the majority of its institutional sales were made to accredited or sophisticated investors. If this happens, Deaton speculated that the crypto payments company might be required to pay between $10 million and $100 million as a fine.

Notably, Deaton asserted that Ripple could pay a significantly lower amount as a fine compared to what the company spent as legal fees defending the case.

As reported earlier, Ripple CEO Brad Garlinghouse disclosed that the company has spent $200 million in legal fees since the lawsuit started.

“I believe the fine will be significantly less than what they spent in legal fees [$200 million]. The SEC thinks that too, and they fear it. That’s why they are going all out and wanting to know all the other sales and transactions,” Deaton added.

Second Circuit Won’t Overturn Judge Torre’s Decision

Commenting on the possibility of the SEC’s appealing Judge Analisa Torres’s summary judgment decision, Deaton asserted that the Second Circuit would not overturn the ruling.

He noted that Judge Torres’ decisions on Ripple’s programmatic sales and other distributions of XRP, which she found to be non-securities, were based on the third factor of the Howey Test (expectation of profit).

However, if the Second Circuit remanded the case, Deaton speculated that Judge Torres would still issue a similar ruling based on the second factor of the Howey Test (common enterprise).

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