Ripple Labs is now seeking to acquire a stay on the monetary portion of the court’s ruling issued on Aug. 7. It was, however, disclosed in a court document dated Sept. 4 that the Securities and Exchange Commission (SEC) has agreed to this request.
The company wants to postpone the payment of the $770 million fine, which was initially due on Sept. 6. Ripple was able to secure the alternative option of setting up a bank account with a deposit of 111% of the judgment amount instead of the traditional bond.
This unique method exploits the Federal Rule of Civil Procedure 62(b). It gives parties the right to stay in the enforcement of a judgment by posting a bond or other security after the judgment has been rendered. The 2018 change to this rule specifically allowed for security forms other than traditional bonds.
In line with this plan, Ripple would transfer the money to an account in the name of its legal counsel, Kellogg, Hansen, Todd, Figel & Frederick P.L.L.C. Ripple would still retain ownership, but the attorney would gain control over the funds.
Legal basis for Ripple proposal
If granted, the stay would be in place until the court has either closed the appeal period after 30 days or resolved any appeal that may be pending. During this time, the SEC would still be able to collect interest on the judgment.
Hansen will be responsible for ensuring the funds stay in the account until the two parties agree to release them or a court order is issued. The law firm had no fiduciary obligations to the SEC.
Both parties concluded that the fund will only be provided to satisfy the judgment if Ripple pays through other means or if the judgment is reversed. If an appeals court changes the judgment, Ripple and the SEC would negotiate in good faith the fund’s treatment.
This new strategy seeks to strike a fair midway between the SEC’s wish to guarantee payment. Additionally, Ripple’s will to avoid the traditional bond payment costs. The proposed order also contains provisions for possible appeals and amendments to the judgment.
