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Pro-XRP Lawyer Reveals Real Reason SEC Threw Out Lawsuit Against Ripple Executives

Widely-followed crypto attorney John E. Deaton has weighed in on the U.S. Securities and Exchange Commission’s decision to dismiss its own case against Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen.

While there is speculation that the dismissal was a strategic ploy by the SEC as it sought to lodge an appeal immediately, Deaton believes the securities watchdog conceded defeat because it had no chance to win in trial.

Deaton Explains Whether SEC Can Appeal Immediately

It has been presumed that the SEC recently dropping charges against Garlinghouse, and Larsen is meant to speed up the judicial process. The two were set to go to trial in the spring, which reportedly would have hindered the SEC’s ability to appeal the court’s decision about institutional investors.

John Deaton took to X (formerly Twitter) to share his thoughts on the possibility of the SEC bringing an immediate appeal against Ripple. Deaton’s post was in response to CNBC cryptocurrency trader Ran Neuner, who voiced concerns about the XRP community celebrating the SEC throwing in the towel.

Neuner had suggested that the agency could file an appeal in the Ripple case sooner than expected, having cleared Ripple’s top leaders of all charges. “Previously, they had to wait until the end of the case, but now that they dropped the case — THEY CAN APPEAL IMMEDIATELY,” he posited.

Deaton agrees that dismissing the charges brings the overall case closer to an appeal. Citing the LBRY case, he however, believes the SEC cannot present its case before the Second Circuit Court of Appeals immediately as the penalty phase of the suit must first take place.

“There will be no immediate appeal. The SEC didn’t dismiss this case because it wanted to get to a faster appeal. It dismissed the case because it didn’t have a chance in hell to win, and the witness list of subpoenas for certain individuals to testify was going to be interesting, to say the least,” Deaton added.

Ripple’s Winning Streak

Ripple notched a major victory in July when the judge presiding over the case declared that the blockchain payments startup had not violated federal securities laws in making XRP available to retail investors by putting it on exchanges — although it did break the law when selling tokens directly to institutional investors.

Earlier this month, the SEC failed to convince the same judge that the July ruling should be overturned before a final verdict is entered in the case next spring.

What likely happens next is Ripple, and the top American financial cop will fight over how much the crypto company needs to cough up in restitution for its $700-plus million in illegal XRP sales. Deaton thinks intensive negotiations will certainly bring this figure much lower. As was in the LBRY case, the SEC initially demanded $23 million, but the company eventually paid only $130,000 after eight-month-long negotiations.

Per Deaton, Ripple will contend that On-Demand Liquidity (ODL) transactions, along with legitimate business costs, should be exempt. That said, the CryptoLaw founder believes negotiations on a mammoth $770 million will probably take longer than eight months, suggesting that an SEC appeal cannot happen in 2023.

While Ripple’s recent string of legal wins has been seen as a sign of major encouragement, the firm and the broader crypto industry are not out of the woods yet.

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