Decoding SEC’s Damage Theory in XRP Lawsuit: Is It a Stroke of Luck for Ripple?

In a recent video update shared by crypto expert James Murphy and Wolf of Wall Street Scott Melker, they discuss the SEC’s damages theory in the Ripple case. Melker highlights what he sees as a fortunate turn of events for Ripple due to a decision by the Second Circuit Court of Appeals.

Melker sheds light on the SEC’s losses theory and points out a significant problem: there are no identifiable XRP buyers who have lost money. The SEC’s case is based on the notion that some buyers purchased XRP at lower prices, which goes beyond the definition of “pecuniary harm” without demonstrating specific financial losses for companies.

The SEC’s case weakens considerably by failing to identify clear victims who have suffered genuine financial losses. The principle of disgorgement, which aims to return illicit profits to those harmed, loses its standing without identifiable victims. This raises doubts about the legitimacy of the SEC’s claimed $200 million interest, as it relies on the existence of discouraged buyers who have suffered financial harm.

Melker’s research suggests that Ripple may have caught a lucky break in this court case. Without evidence of real harm, it would be difficult for the court to justify the proposed $850 million penalty. This underscores the importance of demonstrating actual financial harm in securities lawsuits and implies that Ripple may have a stronger case than initially believed.

Looking ahead, the SEC’s demand for a $2 billion penalty appears unjust for many. While Ripple fights back against the charges, labeling them as intimidation tactics and overreach, if the court sides with the SEC and imposes the fine, Ripple may need to sell approximately 3.22 billion XRP coins at the current market price to raise the necessary funds.

However, Ripple could potentially use its reported $1 billion cash reserves, as disclosed by CEO Brad Garlinghouse earlier this year, to cover the penalty. This would mitigate the immediate impact on XRP’s market dynamics.