Does anyone else remember the phrases "sometimes you just take the win and walk away" or "stop while you are ahead"? Sadly it appears that SEC Chairman Gary Gensler does not have a clue about this very idea. When they scored a settlement with BINANCE and CZ in all honestly if anything it seems to have been a way for Binance to just get out of the US without too much damage. The sums sounded crazy but with Binance they were not that bad and some of the stuff they had been caught with, allowing sanctioned people to trade in USDT and USDC, they had admitted to so in that situation you are kinda screwed.
Gensler's biggest black eye has come from one company as Ripple thoroughly defeated him and his agency last year with a court decision saying that selling XRP through exchanges did not violate securities laws. I had personally banked that Congress was going to pass something to save them and others but instead, the justice system that spiked the football right on his head. Given his position in the US Government, I do not think anyone is surprised Gensler has a vendetta against them and we saw this last week when Ripple's Chief Legal Officer came out before the SEC and said they are going to try and fine them for $2 billion.
The reason that the SEC is gunning for this huge settlement boils down to one thing and that is while they lost the selling of XRP on exchanges they did win XRP sales to institutional investors which totaled $728.9 million. The March 25 filing from the SEC proposed Ripple pay $876,308,712 in disgorgement, $198,150,940 in prejudgment interest, and a $876,308,712 civil penalty. For the $876 million disgorgement penalty well... disgorgement by definition is the repayment of ill-gotten gains with interest to those affected. Let's say hypothetically that this judgment is issued at this price. For those affected to get their money back will they be turning over their XRP? If not then why are they able to double dip when according to the data the SEC used Ripple sold 14.6 billion XRP for a total of $1.38 billion. This would break out to roughly $0.09 per XRP and given these are institutional investors they likely paid a significantly less amount than what was sold to the public via exchanges.
With the $198 million in prejudgement interest, this runs into some significant issues as this encompasses all interest due before the final judgment. This interest covers the interest that disgorgement would otherwise cover. With the disgorgement interest being replaced by prejudgement interest a basic math issue appears... Why with sales of $728.9 million is the SEC trying to say it was $876 million when the court ruled otherwise? The court has ruled one way on one number and the SEC appears to be trying to get around that number. If the $876 million includes interest then there is no need for the $198 million prejudgement interest number.
The last number for civil penalty is where the SEC is trying to punch Ripple and crumple them. Given that the courts have already ruled that the XRP sold on exchanges are not securities the SEC knows Ripple has cash not only now but also coming in as the programed sales occur. Due to that, they have decided to go straight for the neck and rip out their throat with a civil penalty matching disgorgement just an absolutely insane logic to try and justify. Ripple has stated they will be responding to this sometime in April and I can't wait to see what they respond with since it is likely to go straight for the SEC's jugular in response!
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