The recent plea from Ripple Labs for a reduced penalty has been met with criticism by the United States Securities and Exchange Commission (SEC), who deemed it insufficient. Ripple had requested a penalty of no more than $10 million, citing the SEC’s previous settlement with Terraform Labs. However, the SEC countered this request, highlighting their $4.5 billion settlement with Terraform Labs and its co-founder, Do Kwon, which included a $420 million civil penalty.
In a letter to Judge Analisa Torres of the United States District Court for the Southern District of New York, the SEC explained that Terraform Labs had agreed to return money to investors, fired key leaders responsible for the violations, and was facing bankruptcy. The SEC emphasized that Ripple’s comparison of Terraform’s civil penalty to its gross sales was not accurate, as the penalty was measured against the gross profit of the violative conduct, resulting in a higher ratio.
The SEC argued that applying the same ratio to Ripple’s gross profits would result in a civil penalty of $102.6 million, far below the $876.3 million requested. The SEC stated that such a low penalty would not serve the intended purposes of the civil penalty statutes. The SEC’s proposed penalties for Ripple total nearly $2 billion, including prejudgment interest, civil penalties, and disgorgement.
The legal battle between Ripple and the SEC began in 2020 when the SEC accused Ripple of selling unregistered securities. While Judge Torres agreed with this assessment in a ruling, she specified that it applied only to sales to institutional investors. In a separate development, the SEC objected to Ripple’s attempt to seal certain financial records, arguing that the firm should disclose revenue from XRP sales that were deemed unregistered.
In summary, the SEC and Ripple continue to be embroiled in a legal dispute, with the SEC standing firm on its proposed penalties, and Ripple advocating for a lower penalty.