Deaton Predicts Ripple’s SEC Fine Will Be Less Than Amount Spent in Legal Fees

Attorney Deaton speculates that Ripple could pay a fine lower than the amount it spent defending the SEC lawsuit. 

In the wake of Judge Analisa Torres’ recent order regarding the remedies phase of the SEC v. Ripple case, John Deaton speculated that the blockchain company would not pay up to $770 million in disgorgement. 

Judge Torres Latest Order 

Recall that Judge Torres issued the highly-anticipated scheduling order for the remedies phase of the lawsuit earlier this week. As per the order, the parties will complete all remedies-related discovery by February 12, 2024, while the SEC shall file its brief on or before March 13, 2024. 

Ripple is expected to file its opposition by April 12, 2024, and the SEC can file any reply on April 29, 2024. The remedies phase will determine the appropriate fine Ripple will pay for violating the law via the sale of $770 million worth of XRP to institutional clients. 

Factors That Could Reduce Ripple Penalty Amount 

Interestingly, Attorney Deaton during his appearance on Crypto-Law, highlighted several factors that could help Ripple pay a lower penalty instead of the speculated $770M fine. 

Ripple and Remedies: What does it mean? https://t.co/iFYNUcmfaT

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The crypto lawyer highlighted the Supreme Court’s Morrison ruling as one of the legal precedents that could allow Ripple to exclude XRP institutional sales conducted outside of the United States. 

According to Deaton, Ripple execs Brad Garlinghouse and Chris Larsen already mentioned that 95% of their individual XRP sales were made outside the U.S. Notably, Deaton said the same scenario could apply to Ripple’s XRP sales, where a huge chunk of these sales could be outside the SEC’s jurisdiction. 

Deaton speculated that these transactions could apply to 90% of the entire $770M at issue. Consequently, this could drastically reduce the disgorgement amount Ripple might pay.  

Furthermore, Attorney Deaton cited two other cases, Liu v. SEC and SEC v. Govil, as legal precedents that could potentially reduce the disgorgement amount. 

Per Deaton, these cases require disgorgement to be paid to victims who suffered actual financial harm. In this regard, Ripple could only pay disgorgement to XRP investors who bought the coin above the current price of $0.634.  

However, Deaton believes a large amount of Ripple’s institutional sales of XRP were below the current price. 

The pro-XRP lawyer speculates that Ripple will also attempt to exclude its legitimate business expenses, including tax, legal, and travel fees. 

“I am very confident that it [the disgorgement fee] is drastically lower than what people are thinking,” Deaton remarked. 

Disgorgement Could Be Less Than Amount Ripple Spent Defending SEC Case   

Furthermore, Attorney Deaton predicted that Ripple could pay a lower amount than it spent defending the case. 

“Whatever the ultimate number [of the disgorgement] is, it will be less than what Ripple paid in attorney fees,” he predicted. 

As reported earlier, Garlinghouse disclosed that the blockchain company had already spent over $150 million defending the SEC lawsuit. It remains to be seen how much more the blockchain company will spend as the case progresses into the remedies phase.