Attorney Jeremy Hogan has outlined key strategies Ripple may employ to significantly reduce the potential $770 million penalty imposed by the SEC. On November 5, Hogan took to the social media site X to elucidate the critical factors Ripple could use to lower the damages sought by the SEC.
One of the central points emphasized by Hogan is the distinction between Ripple’s net profits and the company’s overall revenue when calculating “disgorgement,” a process aimed at recovering gains from alleged misconduct. By using net profits, Ripple may be able to deduct legitimate business expenditures, thereby reducing the required amount substantially.
Hogan also underscores that the SEC’s regulatory authority is confined to the United States. This limitation could allow Ripple to narrow the scope of the SEC’s action and the accompanying fines by focusing solely on XRP sales with a U.S. nexus.
The SEC initiated legal action against Ripple Labs in December 2020, alleging that the company had conducted an unregistered securities offering through the sale of XRP. Notably, Judge Analisa Torres’s determination that XRP does not qualify as a security when traded on secondary markets marked a significant milestone in the case. This decision, along with the dismissal of several allegations against Ripple’s top executives, has altered the trajectory of the legal proceedings.
Ripple’s legal team, led by lead counsel Stuart Alderoty, has also drawn attention to the Second Circuit verdict in SEC v. Govil. In this case, the court ruled that for the SEC to seek substantial disgorgement, it must demonstrate that investors have genuinely suffered financial harm. Ripple’s argument that the extent of its culpability may depend on whether XRP investors have incurred losses gains further support from this decision.
Judge Torres recently issued an order mandating the SEC and Ripple to submit a briefing schedule pertaining to the institutional sales of XRP, indicating that progress is being made in the case. This section of the case addresses claims that Ripple violated federal securities laws, and the parties must propose a joint briefing schedule by Tuesday, November 9.
These strategic maneuvers by Ripple’s legal team reflect the ongoing battle against the SEC’s allegations and underscore the potential avenues for mitigating the looming $770 million penalty. As the case unfolds, it remains to be seen how these strategies will impact the outcome, making it a closely watched legal battle within the cryptocurrency industry.