SEC Faces Another Loss as XRP Holders Never Lost Money Because of Ripple

Following the Second Circuit decision in the Govil lawsuit, pro-XRP legal experts speculate that the SEC could potentially suffer another defeat against Ripple during the remedies stage. 

Prominent XRP lawyers have taken to the X platform to discuss the implication of a Second Circuit decision in the ongoing SEC v. Ripple lawsuit. 

Ripple CLO Highlights SEC Latest Defeat 

For context, Stuart Alderoty, the Chief Legal Officer (CLO), drew attention to the SEC’s recent defeat against Aaron Govil. 

According to Alderoty, the Second Circuit ruled that the SEC cannot request disgorgement against the defendant without first showing proof that investors suffered genuine financial harm.  

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“In other words, no harm, no foul,” the Ripple CLO said. 

Another loss this week for the SEC – the streak continues. The 2d Circuit in SEC v Govil held that the SEC can’t ask for a crippling disgorgement award w/o first proving that “investors” suffered actual financial harm. In other words, no harm, no foul.

— Stuart Alderoty (@s_alderoty) November 3, 2023

SEC Could Suffer Another Loss Against Ripple 

Following the Govil decision, some legal experts speculate that the SEC could suffer another legal defeat against Ripple Labs during the remedies stage. 

Pro-XRP lawyer Jeremy Hogan said the major reason Alderoty commented on the Govil lawsuit was that Ripple is currently in the ‘damages’ phase. 

Notably, the SEC will need to prove that XRP holders lost money from their investment in the coin for Ripple to be liable. 

Consequently, Attorney Hogan asserted that investors who bought XRP below its current price of $0.61 have not been financially damaged. 

Alderoty is highlighting this case because they are in the “damages” phase.

And this case is saying that XRP holders must have LOST money on XRP in order for Ripple to be liable.

And if you bought XRP for under its current price, you haven’t been damaged – by Ripple, at least. https://t.co/VRR2IIcMDu pic.twitter.com/tMGd1e0hVe

— Jeremy Hogan (@attorneyjeremy1) November 3, 2023

Furthermore, Attorney Bill Morgan raised questions about what evidence the SEC has before Judge Analisa Torres that could support its claim that XRP institutional investors suffered actual financial harm. 

SEC v Gorvil involved fraud. This passage is clear. The equitable remedy is discretionary and meant to compensate victims not give the SEC/Govt a windfall. What evidence before Torres, expert or otherwise, will show actual financial harm to institutional investors. /1 https://t.co/vN77P5bKdu pic.twitter.com/O1b4V7ua7s

— bill morgan (@Belisarius2020) November 4, 2023

If Judge Torres follows the Second Circuit decision in the Govil case, the SEC could be heading for another defeat against Ripple. The securities regulator had suffered multiple losses against the blockchain company. As reported earlier, Judge Torres held that XRP in itself is not a security. She also denied the SEC’s request to certify an interlocutory appeal. 

Upcoming Remedies Phase

It bears mentioning that the remedies phase is the next stage of the SEC v. Ripple lawsuit. In the upcoming proceeding, the court will determine the appropriate fine Ripple will pay for violating the law via its sales of $770 million worth of XRP to institutional investors. 

There have been mixed arguments regarding the potential outcome of the SEC v. Ripple remedies phase. Some legal experts argue that the SEC will try to get Ripple to pay a huge chunk of the $770M sales as fine. 

However, others believe Ripple will significantly reduce the fine during the remedies briefing. In this context, the blockchain company will attempt to exempt ODL-related XRP sales and other legitimate business expenditures from the $770 million.