- Ripple has requested a maximum $10 million penalty in its ongoing case with the SEC, contrasting with the SEC's demand for around $2 billion.
- Ripple referenced the SEC's $4.5 billion settlement with Terraform Labs to argue for a lower penalty.
- SEC countered, stating that the Terraform Labs settlement accounted for the firm's bankruptcy and leadership changes.
Cross-border payment and digital asset custody solutions, Ripple Labs has an ongoing case with the U.S. Securities and Exchange Commission (SEC). And regarding the same, Ripple has requested a court to consider an “appropriate” civil penalty.
The SEC has demanded that Ripple pay around $2 billion, which includes $876 million in civil penalties, $198 million in prejudgment interest, and $876.3 million in disgorgement. Ripple, however, has argued for a maximum penalty of $10 million.
The SEC has dismissed Ripple's request, claiming that such a low penalty would be insufficient.
“Applying it to the $876.3 million in gross profits the SEC here asks the Court to disgorge results in a much larger figure, a $102.6 million penalty, than the $10 million ceiling Ripple insists on … that low of a penalty would not satisfy the purposes of the civil penalty statutes,” stated SEC.
Ripple’s chief legal officer has responded to the U.S. Securities and Exchange Commission (SEC)’s allegations after the crypto firm proposed capping its penalty at $10 million.
He pointed out that the SEC is "raging" and stressed that, unlike the Terraform Labs case, Ripple has no victims requiring compensation.
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
Now, here’s the full scoop behind all this.
On June 13, Ripple referred to the SEC’s settlement with Terraform Labs in a request to Judge Analisa Torres of the Southern District of New York, asking for a penalty of "no more than $10 million"
The next day, the SEC responded with a letter to Judge Torres, explaining that the $4.5 billion settlement with Terraform Labs and co-founder Do Kwon, which included a $420 million civil penalty, was because the firm is bankrupt, agreed to return money to investors, and had dismissed the leaders responsible for the violations.
To clarify the Terraform Labs vs. SEC case, in April 2024, a Manhattan jury found Terraform Labs guilty of fraud. Recently, Terraform Labs and its former CEO, Do Kwon, agreed to a $4.5 billion settlement with the SEC.
However, Ripple filed a notice of supplemental authority, highlighting that the SEC has imposed lower settlements in more severe cases, typically with civil penalties ranging from 0.6% to 1.8%. Ripple argues that Terraform Labs should be similarly categorized, making the SEC's $4.5 billion penalty excessive.
But before Ripple’s filing, a federal judge had already approved the settlement between the SEC, Terraform Labs, and Do Kwon.
In terms of the dispute between Ripple and the SEC, it began in 2020 when the SEC accused Ripple of selling unregistered securities. In July 2023, Judge Torres ruled that Ripple violated regulations but limited the violations to institutional investor sales.
In May, the SEC opposed Ripple's attempt to seal financial records, pushing for the disclosure of revenues from XRP sales previously deemed unregistered by Judge Torres.
Edited by Harshajit Sarmah
