Ripple Argues for Penalty Reduction to $10 Million, Cites Terraform’s SEC Settlement in Appeal
Ripple Labs made a strong case in its lawsuit against the US Securities and Exchange Commission (SEC) on June 13. Citing the Terraform Labs settlement, Ripple argued that the penalty proposed by the regulatory body should be reduced to $10M. By drawing this parallel, Ripple seeks to reduce the SEC’s proposed penalty.
Deep Insights into Ripple and the SEC Settlement Saga
In the ongoing legal tussle between Ripple and the SEC, the firm argued that the US regulator’s proposed $2 billion penalty is unreasonable, as stated in a “notice of supplemental authority.”
In the filing, Ripple’s attorneys pointed out key differences between their case and Terraform Labs’. While Terraform faced fraud charges that wiped out billions in value globally, Ripple is only accused of selling unregistered securities, with no fraud allegations. They argue that the SEC’s pursuit of a similar settlement, despite the differences in charges, is unfair.
“The civil penalty sought by the US SEC in Terraform demonstrates the unreasonableness of the civil penalty sought by the SEC in this (Ripple’s) case,” Ripple’s attorney stated. “As Ripple’s opposition explained, in comparable (and even more egregious) cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues. Terraform fits that pattern.”
🚨BREAKING: @Ripple files Notice of Supplemental Authority regarding TerraForm Labs Consent Judgment!
The SEC v. RIPPLE case could end ANYTIME! #XRP pic.twitter.com/4n5RF5SiHY
— JackTheRippler ©️ (@RippleXrpie) June 13, 2024
New York District Court Judge Jed Rakoff signed off on the SEC and Terraform Labs settlement on June 13. The settlement includes $3.6 billion in disgorgement fines, a $420 million civil penalty, and almost $467 million in prejudgment interest. This came a day after Terraform Labs and former CEO Do Kwon agreed to pay a $4.47 billion fine in their SEC fraud case on June 12.
Additionally, Kwon must pay an $80 million civil fine and transfer $204.3 million to the company’s bankruptcy estate to repay investors.
🚨JUST IN
🇺🇸US judge approves Terraform’s $4.5B settlement with SEC pic.twitter.com/iH9KCEwmh7
— Global Rashid (@globalrashid007) June 14, 2024
With reference to the Terraform Labs settlement, Ripple wants to demonstrate that the SEC’s penalty request is excessive and should be reduced to a more reasonable amount.
Oversight into Ripple and the SEC Years Long Battle
Ripple has been engaged in a prolonged legal battle with the SEC, which began on December 22, 2020. The US regulator sued Ripple for raising over $1.3 billion through the illegal sale of XRP tokens to retail and institutional investors, alleging that XRP constitutes unregistered securities.
In July 2023, a New York federal court ruled that while the sale of XRP on exchanges and through algorithms did not violate American securities law, sales to institutions did. Initially, the lawsuit also targeted Ripple’s CEO, Brad Garlinghouse, and Co-Founder, Chris Larsen, but the charges against them were dropped in October 2023.
In March 2024, the SEC proposed a recovery and civil penalty amounting to $1.95 billion. Still, Ripple opposed the penalty request by asking the Court to deny the SEC’s requests for an injunction, disgorgement, and pre-judgment interest while advocating for a civil penalty of no more than $10 million.
The blockchain firm filing also included a redacted paragraph detailing its revenue from institutional sales, income taxes paid, and incurred losses. This showed that it had no gains to disgorge, a key argument in its defense against the SEC’s proposed penalties.
Nevertheless, crypto enthusiasts speculate that the industry will likely see the conclusion of the Ripple and the SEC saga by the end of 2024.
