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As Ripple and the SEC anticipate the court’s ruling on remedies, Attorney Murphy identifies the “crazy” part of the SEC’s demand for disgorgement in the lawsuit.
Prominent legal expert James “MetaLawMan” Murphy has provided fresh insights into the SEC v. Ripple lawsuit, especially the regulator’s demand for disgorgement.
In the context of securities regulations, disgorgement entails surrendering all ill-gotten gains obtained through unlawful activities.
Recall that in the SEC’s opening remedies-related brief, the regulator asked the court to impose a nearly $2 billion penalty against Ripple following its violation of federal securities laws. The $2 billion fine the SEC seeks consists of $876.3 million in disgorgement, another $876.3 million in civil penalty, and $198.15 million in prejudgment interest.
Crazy Part of SEC’s Disgorgement Demand
Commenting on the development, Murphy pointed out that the U.S. Supreme Court has already made it clear that all disgorgements should be given to the victims of the case.
“One thing the U.S. Supreme Court has been really clear about is that disgorgement is supposed to go to the victims,” he said.
Attorney Murphy made the remark during a recent interview on the Good Morning Crypto podcast.
Want to know the craziest part about the SEC's demand for disgorgement in the @Ripple case?
This 👇 pic.twitter.com/Z5A0KQDf6o
— MetaLawMan (@MetaLawMan) May 14, 2024
He emphasized that any funds the SEC recovered as disgorgement would be given to victims of the Ripple case. It bears mentioning that the so-called victims of Ripple’s securities law violation are institutional buyers of XRP.
To put it into perspective, Attorney Murphy noted that should the SEC win, the regulator would direct the disgorged funds to institutional buyers of XRP without keeping any of it for itself or the United States Treasury.
According to Murphy, this move would only make institutional buyers of XRP richer because they already made a profit from their interactions with Ripple.
“Can you imagine wiring tens of millions of dollars to big institutions that already made a profit from their interaction with Ripple? That has to happen. The clearest part of this whole picture is that the [disgorged] money has to go to these ‘victims,’” Attorney Murphy remarked.
Ripple Shares Similar Sentiment
Furthermore, Murphy shared an excerpt from Ripple’s remedies-related reply brief, pointing out how the company made a similar argument.
In the motion, Ripple argued that any disgorgement for XRP institutional buyers, who already received the benefit of their bargain, would be “conferring a windfall.”
The company made the point to support its argument that no disgorgement is warranted, as it urged the court to award a civil penalty of not more than $10 million.
SEC Wants to Make Institutional Customers Richer
Expectedly, Murphy’s recent analysis elicited reactions from other pro-XRP lawyers, including Attorney Bill Morgan.
Reacting, Attorney Morgan criticized the SEC for planning to make XRP institutional customers richer through its demand for disgorgement. He characterized the SEC’s disgorgement demand as one of the anomalies in the Ripple lawsuit, which protects nobody.
😂 have a listen. The SEC wants to make Ripple ‘s sophisticated institutional customers richer at Ripple’s expense by the remedy of disgorgement. This is just one anomaly of many of this crazy lawsuit that is literally protecting nobody. https://t.co/pSwrURfxAB
— bill morgan (@Belisarius2020) May 14, 2024
Meanwhile, the parties have already filed the necessary remedies-related brief. They are currently in the phase of filing omnibus motions regarding sealing confidential information associated with the remedies brief.