SEC Denies Ripples Request for Reduced Penalty
The ongoing legal dispute between Ripple Labs and the United States Securities and Exchange Commission (SEC) has taken a new twist as the SEC has refused Ripple’s plea for a reduced civil penalty.
Ripple had proposed a maximum penalty of $10 million, which is a significant decrease from the $876.3 million civil penalty that the SEC is seeking.
In an attempt to justify their request for a lower penalty, Ripple referred to the SEC’s recent settlement with Terraform Labs and its co-founder, Do Kwon. The settlement amounted to $4.5 billion, which included a $420 million civil penalty. Ripple’s argument was based on the fact that the civil penalty represented approximately 1.27% of Terraform Labs’ gross sales. However, the SEC dismissed this comparison, stating that the cases were not directly comparable.
The SEC emphasized that Terraform Labs is now bankrupt, has agreed to reimburse investors, and has terminated the leaders responsible for the violations. In contrast, Ripple has not agreed to such relief measures.
Furthermore, the SEC explained that the civil penalty against Terraform Labs was based on the gross profit of the violations, which amounted to over $3.5 billion, resulting in a penalty ratio of nearly 12%. Applying the same ratio to Ripple’s case would result in a civil penalty of $102.6 million, according to the SEC.
The SEC is seeking nearly $2 billion in penalties from Ripple, including $876.3 million in disgorgement, $198.2 million in prejudgment interest, and $876.3 million in civil penalties. These hefty fines are intended to deter violations and enforce accountability in the cryptocurrency industry.
The legal dispute between the SEC and Ripple began in 2020 when the SEC alleged that Ripple sold unregistered securities. The case is ongoing, with the SEC opposing Ripple’s attempt to seal some of its financial documents and insisting that the firm disclose the revenue earned from unregistered XRP sales.
