SEC Rejects Ripple’s Plea for Reduced Penalty
The United States Securities and Exchange Commission (SEC) has firmly rejected Ripple Labs’ recent plea for a reduced penalty in their ongoing legal battle. Ripple had requested a penalty of no more than $10 million, significantly lower than the SEC’s proposed $876.3 million civil penalty.
Ripple’s Argument
Ripple’s argument for a lower penalty was based on the SEC’s recent settlement with Terraform Labs. In a June 13 letter to New York District Court Judge Analisa Torres, Ripple cited the SEC’s $4.5 billion settlement with Terraform and its co-founder Do Kwon, which included a $420 million civil penalty. Ripple argued that this penalty was approximately 1.27% of Terraform’s $33 billion in gross sales, suggesting a similar approach should be applied to their case.
SEC’s Response
The SEC responded the following day, arguing that Ripple’s comparison was not valid. The regulator pointed out that Terraform’s penalty was calculated based on the gross profit of the violative conduct, which was over $3.5 billion, resulting in a nearly 12% penalty ratio.
Applying this same ratio to Ripple’s gross profits of $876.3 million would result in a civil penalty of $102.6 million, which the SEC argued would not meet the purposes of civil penalty statutes.
SEC’s Proposed Penalties
The SEC has proposed nearly $2 billion in total penalties for Ripple, which includes:
– $198.2 million in prejudgment interest
– $876.3 million in civil penalty
– $876.3 million in disgorgement
The SEC emphasized that Ripple has not agreed to any of the relief measures that Terraform did, such as returning money to investors or firing leaders responsible for the violations. The regulator argued that a lower penalty would not be sufficient to satisfy the statutory purposes of civil penalties.
Background
The legal battle between the SEC and Ripple has been ongoing since 2020, when the SEC accused Ripple of selling unregistered securities. Judge Torres ruled that Ripple did sell unregistered securities, but only to institutional investors.
Last month, the SEC also objected to Ripple’s attempt to seal some of its financial records, arguing that the firm should disclose the revenue it made from XRP sales that were ruled unregistered.
Conclusion
The SEC’s firm stance against Ripple’s plea for a reduced penalty underscores the regulator’s commitment to enforcing securities laws in the cryptocurrency space. As the legal battle continues, the outcome will likely have significant implications for the broader crypto industry.
Angel Marinov is the Managing Editor at Coinlabz. With extensive knowledge of crypto payments and blockchain use cases, Angel is a trusted source of accurate and timely information
