In the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC), John Deaton, a lawyer representing XRP holders, has presented a compelling argument suggesting that the anticipated return of $770 million to Ripple is unlikely. His predictions are based on several factors that could influence the court's decision.
A significant aspect highlighted by Deaton is the relevance of the Supreme Court's Morrison ruling, which limits the SEC's jurisdiction over sales within the United States. This becomes crucial as Ripple faces scrutiny over its XRP sales in various international jurisdictions, including the UK, Japan, and Switzerland. These countries' regulatory stance on XRP, not classified as a security by the UK’s Financial Conduct Authority (FCA) and Japan’s Financial Services Agency (FSA), supports Ripple’s position and complicates the SEC's efforts to recover funds from global transactions.
Deaton underscores that the legal action against Ripple centers on regulatory disagreements rather than fraud. This distinction is vital as it shifts focus away from punitive measures toward regulatory compliance. Given that a substantial portion of XRP sales occur outside the U.S. and involve accredited investors, the likelihood of recovering ill-gotten gains diminishes. Deaton estimates that excluding sales outside the U.S., which may constitute over 90% of total sales and involve accredited investors, would significantly reduce the potential forfeiture amount.
Moreover, Deaton emphasizes that most institutional XRP sales did not result in harm, as current XRP prices exceed levels seen during these sales, indicating no financial losses for investors. He also highlights the swift nature of XRP On-Demand Liquidity (ODL) transactions, which can be completed in seconds, reducing the potential for investors to suffer harm. Interestingly, the accusations of harm appear to be directed more at the SEC than at Ripple, particularly concerning the 75,000 XRP holders involved in the legal proceedings.
