Is the SEC Liable for Statutory Interest if Appeal Fails?

• Attorney Fred Rispoli questions if Ripple could receive statutory interest if it wins an appeal and the $125 million SEC penalty is returned.
• James Farrell suggests Ripple might delay the $125 million payment pending appeal.
• The outcome could hinge on whether Ripple cross-appeals, affecting the potential for statutory interest and appeal costs.

Key players in the crypto community are pondering the scenario of what might happen if there is an appeal in the recently concluded Ripple-SEC case.

Attorney Fred Rispoli sparked a conversation on X, asking whether Ripple might be entitled to statutory interest if it wins an appeal and the $125 million penalty is returned. Rispoli called on securities lawyers to weigh in on the discussion.

For context, on August 7, Ripple Labs secured a major legal win against the SEC as Judge Analisa Torres significantly reduced the SEC’s $2 billion demand to a $125 million penalty. The ruling essentially concluded the multi-year legal dispute that began in December 2020, when the SEC accused Ripple of illegally selling XRP as unregistered securities. 

However, the prospect of an appeal in the case has been a major subject of discussion in the crypto community, especially as the regulator had previously signaled its interest in appealing the July 2023 ruling concerning the secondary sales of XRP.

Rispoli adds a new layer of intrigue to the matter by questioning whether the SEC would be required to pay statutory interest on top of returning the $125 million penalty to Ripple.

James Farrell, an attorney who previously worked with the SEC, responded that Ripple would likely delay paying the $125 million fine while the appeal is pending, potentially securing it with a bond.

If the SEC loses, the cost of the bond could be passed on to them as part of the appeal costs under the Federal Rules of Appellate Procedure (FRAP) 39. Things could get more complicated, however, if the Second Circuit Court of Appeals sends the case back for a new trial.

Farrell noted that this would hinge on whether Ripple cross-appeals; without a cross-appeal, Ripple would essentially concede the $125 million penalty.