Deaton emphasises that the lawsuit against Ripple is primarily about a regulatory dispute rather than fraud. In the ongoing legal battle between Ripple and the SEC, attorney John Deaton has effectively argued on behalf of XRP holders that the projected $770 million disgorgement for Ripple is unlikely. He bases his forecast on a number of significant variables that could affect the court’s decision.
Deaton emphasises the importance of the Morrison decision from the Supreme Court, which essentially restricts the SEC’s authority to sales made within the borders of the United States. This becomes more important as concerns are raised about Ripple’s XRP sales in the UK, Japan, Switzerland, and other countries. Furthermore, XRP’s legal position in these jurisdictions supports Ripple’s position.
For instance, XRP has not been classified as a security by regulatory organisations such as the Financial Services Agency (FSA) in Japan and the Financial Conduct Authority (FCA) in the United Kingdom. This classification is significant because it allows XRP sales to continue lawfully in these areas, which puts the SEC’s attempt to obtain disgorgement from these international transactions in jeopardy.
Deaton further emphasises that the lawsuit against Ripple is primarily about a regulatory dispute rather than fraud. This distinction is essential because it shifts focus from punitive actions to compliance with regulations. Considering that accredited investors make up a large portion of XRP sales that take place outside of the United States, the likelihood of disgorgement is greatly reduced.
Deaton projects a significant drop in the possible disgorgement amount when non-U.S. sales which could account for more than 90% of total sales—and sales to accredited investors are excluded.
Moreover, the attorney emphasises that the majority of institutional XRP sales have not caused harm because the current price of XRP is higher than the levels during those sales, indicating that there have been no losses for investors. Deaton further emphasises how quickly On-Demand Liquidity (ODL) transactions with XRP happen, they happen in a matter of seconds which lowers the risk of damage to investors. It’s interesting to note that the SEC is the target of more harm allegations than Ripple, especially from the 75,000 XRP holders involved in the legal action.