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**Analysis of SEC's Damage Theory**

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by Giorgi Kostiuk

2 years ago


A recent video update shared by crypto expert James Murphy and Wolf of Wall Street Scott Melker delves into the complexities of the SEC's damages theory in the Ripple case. Melker highlights a fortunate turn of events for Ripple due to a decision by the Second Circuit Court of Appeals. This decision raises an important issue about a legal precedent requiring the SEC to show wrongdoing by identifying victims who have experienced real financial losses.

Melker emphasizes the SEC's losses theory, pointing out a significant problem: the inability to identify XRP buyers who have lost money. The SEC's case relies on the notion that some buyers purchased XRP at lower prices, which does not align with the concept of "pecuniary harm" without evidence of specific entities suffering financial losses.

The lack of clear victims who have incurred genuine financial harm weakens the SEC's case significantly. The principle of disgorgement, aimed at returning illicit profits to those affected, falters without identifiable victims. This casts doubt on the validity of the SEC's claimed $200 million interest, as it hinges on the existence of aggrieved buyers experiencing financial losses.

Questioning SEC's Penalty

Melker's research implies that Ripple may have caught a break in this legal battle, as the absence of evidence of actual harm makes it challenging for the court to justify the proposed $850 million penalty. This highlights the importance of demonstrating real financial harm in securities lawsuits and suggests that Ripple may have a stronger case than previously believed.

Implications for the Future

Moving forward, the SEC's demand for a hefty $2 billion penalty appears unjust to many. Ripple is pushing back against the charges, deeming them an intimidation tactic and an overreach. If the court rules in favor of the SEC and imposes the $2 billion fine on Ripple, the company may need to sell approximately 3.22 billion XRP coins at the current market price of $0.62 per coin to generate the necessary funds.

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

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