SEC New Filing in Ripple Case Stirs Settlement Debate in XRP Community

15.06.2024

Following the SEC’s latest filing in the Ripple case, XRP community members speculate that the parties could settle this summer.

The U.S. Securities and Exchange Commission (SEC) has filed its response to Ripple’s supplemental authority letter regarding the Consent Judgment in the SEC v. TerraForm Labs (TFL) lawsuit.

Ripple Supplemental Authority

Recall that Ripple filed the letter on June 13 to further support its opposition to the SEC’s remedies-related demand of $2 billion. According to the TFL Consent Judgment, the defendant agreed to settle the SEC lawsuit by paying over $3.58 billion disgorgement and a civil penalty of $420 million.

Consequently, Ripple contended that the civil penalty represents 1.27% of TFL’s gross sales of $33 billion. The crypto payments company stated that the agreed amount is substantially less than the amount requested by the SEC in its case. Furthermore, Ripple argued that while the TFL judge uncovered two fraudulent schemes that led to the wipeout of over $40 billion, there was no evidence of fraud in its case.

SEC Response

It bears mentioning that seasoned defense lawyer James K. Filan shared the SEC’s response on X today. According to the filing, the SEC emphasized that the TFL’s Consent Judgment stemmed from a settlement, adding that such an event is of limited value in determining remedies.

#XRPCommunity #SECGov v. #Ripple #XRP @SECGov has responded to @Ripple’s letter regarding the TerraForm Labs Consent Judgment. pic.twitter.com/VvGSJffwa8

— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) June 14, 2024

With Ripple asking the court to tether the determination of the TFL settlement to its penalty determination, the SEC argued that the crypto payments company did not consider certain factors. These include TFL’s bankruptcy, the company’s acceptance to destroy the keys to the wallet holding its crypto assets, and the reimbursement of a significant amount of investors’ losses.

“The SEC took all these factors in agreeing to a settlement and repeatedly cited them as the facts relevant for the court to approve the settlement under applicable law,” the regulator remarked.

However, the SEC pointed out that Ripple did not agree to any of the reliefs cited in the TFL case. The SEC emphasized that the TFL settlement is irrelevant in determining the penalties necessary to punish Ripple because the latter did not acknowledge its violation of securities laws. Instead, it has continued to “enrich itself by engaging in conduct awfully similar to the conduct that resulted in the violation of securities laws in the first place,” the SEC argued.

SEC Faults Ripple’s Representation of TFL Penalty Ratio

Furthermore, the SEC faulted Ripple’s comparison of TFL’s civil penalty of $420 million to the gross sale of $33 billion, noting that the company should have compared the penalty to the gross profit of $3.587 billion.

The securities regulator argued that the $420 million to $3.587 billion ratio is significantly higher at 11.7%. The SEC claimed that applying the figure to Ripple’s gross profits of $876.3 million it seeks as disgorgement would also result in a potential penalty of $102.6 million instead of the $10 million cap the defendant insists on.

XRP Community Thinks a Settlement Could Happen This Summer

Following the SEC’s estimation, XRP community members speculated that the SEC v. Ripple case could be heading for a settlement.

Abdullah “Abs” Nassif, the host of the Good Morning Crypto podcast, stated that the SEC is now asking for a settlement of $102.6 million rather than the nearly $2 billion it initially requested.

He created a poll urging XRP enthusiasts to vote on whether they believe the SEC and Ripple will agree to a settlement this summer. With 13 hours left before the poll ends, 69.1% of the 780 votes cast so far opine that the parties will settle this summer.