- US regulator the SEC has rejected XRP token founder Ripple’s request for a reduced civil penalty, arguing that the “wealthy” company needed a stronger deterrent.
- The agency rebuked Ripple’s claims that a US$10m penalty was appropriate in line with the SEC’s recent settlement in its fraud case against Do Kwon’s Terraform Labs, saying the details of the two cases differ significantly.
Shots continue to be fired in the legal case that has been going since 2020 between the US Securities and Exchange Commission (SEC) and Ripple, as the regulator seeks to exact massive fines from the company.
On June 13th, a Ripple filing to the US District Court handling the case argued that the SEC’s proposed civil penalty of up to US$2 billion (AU$3 billion) was unreasonable, given its settlement with Terraform Labs last week. Ripple said Terraform’s penalties accounted for around 1.2% of its gross sales, and by that logic its penalty should be closer to US$10m (AU$15.1m).
The SEC immediately countered that figure was too low in a June 14th letter to the presiding judge, pointing out that its settlement with Terraform had been reached due to the company being in bankruptcy and agreeing to return a significant amount to investors and fire leaders in charge at the time of the violations. Whereas:
Ripple is agreeing to none of this relief—in fact, Ripple is agreeing to nothing.
SEC Related: SEC Delivers Decisive Final Response in Remediations Stage of Ripple XRP Legal Battle
SEC: $10m or $102.6m, Still Too Low To Teach Ripple A Lesson
Terraform Labs will pay US$420 million (AU$634m) in civil fines as part of its US$4.47 billion settlement with the SEC announced on June 12th.
The SEC’s letter argues the sales-to-penalty ratio in the Terraform settlement highlighted by Ripple is not an “apples-to-apples” comparison and that when Terraform’s penalty was assessed in relation to the gross profit of its violative conduct, the ratio was 11.7%. In Ripple’s case, that should see them facing at least a US$102.6m penalty.
However, the SEC said that’s too low to punish and deter Ripple, which is “indisputably wealthy” and has failed to recognise or acknowledge its violation of the securities laws and continues to make money through similar practices to those that saw the lawsuit filed originally.
…that low of a penalty would not satisfy the purposes of the civil penalty statutes.
SEC While Ripple’s XRP token price briefly rallied over the weekend on speculation of a settlement, which would have seen an end to the remedies proceedings—there’s no evidence that’s likely to occur.
Key moments in the SEC vs Ripple case of late include:
- In July 2023, the judge presiding over the lawsuit ruled that XRP was not a security, and denied an SEC motion for appeal in October.
- In October 2023, the SEC voluntarily dismissed its case against Ripple executives Brad Garlinghouse and Chris Larsen.
- In March 2024, the SEC filed its opening brief for remedies and filed its final reply in May, arguing the company should face permanent injunctions and fines of up to US$2B.
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