Amidst the rumors circulating in the crypto community, John E. Deaton, the amicus curiae in the lawsuit, has shed light on the potential for a settlement between the SEC and Ripple. In a Twitter thread posted on October 27th, Deaton, a lawyer, delves into the possibility of a settlement and whether it can be achieved at this stage.
Deaton begins by asserting that, from his perspective, there hasn’t been a serious conversation about settlement between Ripple, Brad Garlinghouse (CEO of Ripple), Chris Larsen (co-founder of Ripple), and the SEC. He explains that the SEC is seeking a staggering $770 million in fines, to which Ripple has understandably refused. In an effort to reduce this hefty amount, Ripple plans to exclude ODL (On-Demand Liquidity) transactions and make efforts to cut down on salaries, expenses, and other costs.
Furthermore, Deaton emphasizes that the process of reaching a remedy is akin to another legal case, necessitating further depositions and the production of pertinent documents, such as emails, ODL transactions, and contracts.
Deaton cites the SEC’s lawsuit against LBRY as an example of a case that was eventually settled. Initially, the SEC demanded a fine of $23 million from LBRY, resulting in an arduous eight-month court battle involving the production of documents and the deposition of Jeremy Kauffman, CEO of LBRY. However, the penalty sought by the SEC was ultimately reduced to $130,000, which LBRY duly paid.
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Regarding the possibility of a settlement between the SEC and Ripple, Deaton asserts that it can only happen if the cryptocurrency exchange Coinbase wins the motion to dismiss (Mtd) the lawsuit. According to Deaton, this outcome would discourage the SEC from continuing its aggressive stance towards the crypto industry and compel them to seek a resolution with Ripple.
The context surrounding the SEC’s lawsuit against Ripple is vital for understanding the potential implications of a settlement. The SEC filed the lawsuit in December 2020, accusing Ripple of conducting an unregistered securities offering worth $1.3 billion. This allegation revolves around XRP, the digital asset associated with Ripple. The SEC argues that XRP should be classified as a security and fall under the jurisdiction of securities laws.
Since the lawsuit’s initiation, Ripple has been eager to defend its actions and the regulatory status of XRP. Ripple aims to prove that XRP is not a security and therefore not subject to securities regulations. The legal battle has significant implications for the wider crypto industry, as the outcome could set an important precedent for the classification of various digital assets.
As the legal proceedings continue, the possibility of a settlement becomes a focal point. Both Ripple and the SEC have reasons to consider a settlement. For Ripple, a settlement would allow the company to avoid a lengthy and expensive legal battle that might have uncertain outcomes. Moreover, a settlement could help restore investor confidence in XRP, potentially leading to increased adoption and market stability.
On the other hand, the SEC may also see value in reaching a settlement. Settling the lawsuit would allow the SEC to avoid the potential risk of an unfavorable court decision that may not establish the precedents they desire. Additionally, a settlement would free up regulatory resources, allowing the SEC to focus on other pressing issues in the crypto space.
In light of these potential benefits, it is clear why discussions of a settlement may be on the table. However, the road to a settlement is by no means easy. Both parties have firmly entrenched positions, with Ripple fiercely defending its actions and the SEC highlighting its obligation to protect investors. Finding common ground and negotiating fair terms will require extensive dialogue and compromise.
As the crypto community anxiously awaits the resolution of this legal battle, the possibility of a settlement remains a topic of great interest. The outcome of this case will have long-lasting implications not only for Ripple but for the entire crypto industry, shaping the regulatory framework and potential classification of digital assets for years to come.
