Expert Cites Condition That Could Make Ripple Pay Over $3 Billion As Penalty to SEC

Prominent Financial expert and XRP YouTuber Zach Rector speculates that Ripple could pay over $3B in disgorgement to the U.S. SEC if Judge Torres rules ODL-related sales are securities.

Zach Rector claims that Ripple could pay billions of dollars as a fine to the U.S. SEC for violating federal securities laws via its institutional sales of XRP.

Remedies Phase of SEC Vs Ripple

Rector made this known during his recent SEC v. Ripple case analysis on YouTube. Notably, the SEC v. Ripple lawsuit is currently in the remedies phase. Last week, the SEC filed a motion to compel Ripple to produce two documents and one interrogatory.

The requested documents include Ripple’s audited financial statements from 2022-2023, as well as the company’s contracts related to institutional sales dated after the regulator initially filed the complaint in December 2020.

For the interrogatory, the SEC wants Ripple to disclose how much proceeds it made through its institutional XRP sales since the complaint was filed.

Billions of Dollars At Stake

With the SEC focusing on Ripple’s post-complaint financial statements, Rector speculated that “billions [of dollars] are at stake” for the popular crypto payments company.

He noted that Ripple risks paying billions of dollars as a fine if Judge Analisa Torres rules that all of the company’s post-complaint sales are securities.

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According to Rector, the SEC claims that Ripple has sold about $3 billion worth of XRP since it sued the company in December 2020. At the beginning of the lawsuit, the SEC claimed that Ripple raised $1.3 billion in 2013 by selling unregistered securities.

The figure was drastically reduced to around $750 million after Judge Torres ruled that Ripple’s programmatic sales and other distributions of XRP do not constitute unregistered securities.

While many legal experts speculate that Ripple might reduce the $750M during the remedies proceeding, Rector predicted that the company could pay more.

“If the judge rules that all of these ODL (On-Demand Liquidity now rebranded to Ripple Payments) sales from 2020 to 2024 were securities, the tallies enter into billions of dollars worth. It might even be more than the original $3 billion that the SEC has cited. This is why billions are at stake for Ripple,” he remarked.

Ripple to Appeal Negative Ruling

Notably, Rector expects Ripple to file an appeal in the Second Circuit if Judge Torres rules that the company’s post-complaint sales of XRP, including those related to ODL, constitute an investment contract.

The YouTuber said Ripple must have gotten assurance from its lawyers that there was no way ODL-related sales could be deemed as securities.

He noted that clients purchasing XRP for ODL purposes are not expecting to make profits from Ripple’s efforts. Hence, he speculated that Ripple would appeal the ruling if Judge Torres found ODL-related XRP sales to be securities.

Ripple to Oppose SEC Motion to Compel

In the meantime, Ripple is expected to file its response to the SEC’s motion to compel on January 19. Ripple will be opposing the request in its upcoming motion.

The remedies proceeding of the lawsuit is still in the discovery phase, which is scheduled to be concluded by February 12, 2024. As scheduled by the court, the SEC will file the last motion of the remedies proceeding on April 29, 2024. After which, the court will issue its ruling with respect to the remedies.

There is no official date on when the judge might issue the ruling. However, pro-XRP lawyer Fred Rispoli speculates that the judge’s ruling could be issued in early summer.