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Ripple Could Face Billions in Fines: Shocking Scenario Revealed by Analyst

The Ripple vs. SEC lawsuit, a saga that has gripped the cryptocurrency community for years, took a dramatic turn with a potential multi-billion dollar fine hanging over Ripple’s head. Renowned crypto expert Zach Rector, in a recent YouTube analysis, laid out a worst-case scenario that could see the payments giant cough up a staggering $3 billion to the U.S. Securities and Exchange Commission (SEC).

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Disgorgement on the Horizon?

At the heart of the potential penalty lies the regulatory question of whether XRP, Ripple’s native token, constitutes an unregistered security. Rector argues that if Judge Analisa Torres rules in favour of the SEC on XRP’s On-Demand Liquidity (ODL) sales being investment contracts, a disgorgement fine of “$3 billion to $3.5 billion” could be imposed. This figure is based on the SEC’s claim that Ripple sold approximately $3 billion worth of XRP since the lawsuit began in December 2020, adding to the $1.3 billion allegedly raised through illegal sales in 2013.

Hope Amidst Uncertainty

However, a silver lining emerged when Judge Torres ruled that Ripple’s programmatic sales and other general distributions of XRP are not securities. This significantly reduced the potential disgorgement amount to $777 million. Nonetheless, Rector anticipates an appeal from Ripple if ODL sales are deemed securities, as the company likely received assurances from its legal team that such transactions wouldn’t fall under securities regulations.

Customers Not in it for Profits?

Rector further emphasizes that ODL customers don’t necessarily purchase XRP with the expectation of profiting from Ripple’s success. This, he argues, strengthens the case against classifying ODL sales as investment contracts. Should Torres rule otherwise, an appeal would be inevitable.

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Selling XRP Despite Fines?

The narrative that Ripple wouldn’t be able to sell XRP again after paying the fine is dismissed by Rector as “incorrect.” He asserts that the company could continue all aspects of XRP sales, even after a potential disgorgement.

Discovery Phase: Gathering Evidence

The lawsuit is currently in the remedies phase, specifically the discovery phase, where both parties gather evidence and information. The SEC recently filed a motion requesting two key documents from Ripple: the contract governing its post-complaint institutional XRP sales and audited financial statements from 2022 to 2023. Ripple’s response is expected on January 19, followed by its motion opposing the SEC’s request. The SEC will submit its final remedies filing on April 29, 2024, after which the court will make its final decision.

Ripple
XRP trading at $ 0.577 on the 1D chart | Source: XRPUSDT on Tradingview.com

A Pivotal Moment for Crypto Regulation

This latest development in the Ripple vs. SEC case has significant implications for the broader cryptocurrency market. A billion-dollar fine against Ripple could set a precedent for future regulatory actions against other digital asset companies. The court’s final decision will be closely watched by the entire crypto industry, as it could shape the regulatory landscape for years to come.

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