TLDR
- The SEC has rejected Ripple’s argument for a lower civil penalty of no more than $10 million in their ongoing legal battle.
- Ripple cited the SEC’s recent settlement with Terraform Labs as a basis for a reduced penalty, but the SEC argued the cases are not comparable.
- The SEC is seeking nearly $2 billion in total penalties from Ripple, including $876.3 million in disgorgement, $198.2 million in prejudgment interest, and $876.3 million in civil penalties.
- The SEC stated that applying the same penalty ratio used in the Terraform Labs case to Ripple’s gross profits would result in a $102.6 million civil penalty, which they argue is still too low.
- The legal battle between the SEC and Ripple began in 2020 when the SEC claimed Ripple sold unregistered securities, and the case continues as both parties have not yet reached a middle ground.
The ongoing legal battle between the United States Securities and Exchange Commission (SEC) and Ripple Labs has taken another turn as the SEC has rejected Ripple’s argument for a lower civil penalty.
Ripple had proposed a maximum penalty of $10 million, significantly lower than the $876.3 million civil penalty sought by the SEC.
In an attempt to reduce the penalty, Ripple cited the SEC’s recent settlement with Terraform Labs and its co-founder, Do Kwon.
The $4.5 billion settlement included a $420 million civil penalty, which Ripple argued was around 1.27% of Terraform Labs’ gross sales. Ripple’s lawyers claimed that in comparable cases, the SEC had agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues.
The @SEC is raging. Ripple defended itself – “agreeing to nothing.” The court gave clarity that XRP is not a security. There are no “victims” to compensate. And worst of all for the @SEC, Ripple is thriving. But at least @SEC seems to have abandoned its absurd demand for $2B. https://t.co/KVSkB9OqlH
— Stuart Alderoty (@s_alderoty) June 15, 2024
However, the SEC countered Ripple’s argument, stating that the cases were not an “apples-to-apples comparison.”
The regulator pointed out that Terraform Labs is now bankrupt, has agreed to return money to investors, and has fired the leaders who were in charge at the time of the violations. In contrast, Ripple has not agreed to any such relief measures.
The SEC further explained that the civil penalty against Terraform Labs was based on the gross profit of the violative conduct, which amounted to over $3.5 billion, resulting in a penalty ratio of nearly 12%.
Applying the same ratio to Ripple’s case, where the SEC is seeking disgorgement of $876.3 million in gross profits, would result in a civil penalty of $102.6 million. The SEC argued that such a low penalty would not satisfy the purposes of the civil penalty statutes.
In total, the SEC is seeking nearly $2 billion in penalties from Ripple, which includes $876.3 million in disgorgement, $198.2 million in prejudgment interest, and $876.3 million in civil penalties. These steep fines aim to discourage violations and enforce responsibility in the cryptocurrency industry.
The legal battle between the SEC and Ripple began in 2020 when the SEC claimed that Ripple sold unregistered securities. In July 2023, Judge Analisa Torres of the United States District Court for the Southern District of New York ruled that Ripple did sell unregistered securities, but only to institutional investors.
As the case continues, the SEC has opposed Ripple’s bid to seal some of its financial documents, arguing that the firm should disclose the revenue it earned from XRP sales that were deemed unregistered by Judge Torres.
