The U.S. Securities and Exchange Commission (SEC) has firmly rejected Ripple Labs’ request for a reduced penalty, insisting that the proposed reduction is insufficient.
On June 13, Ripple appealed to Judge Analisa Torres of the U.S. District Court for the Southern District of New York, seeking a penalty of no more than $10 million. This is significantly lower than the SEC’s suggested $876.3 million civil penalty. Ripple drew a parallel to the SEC’s $4.5 billion settlement with Terraform Labs, which included a $420 million civil penalty, attributing it to the firm’s bankruptcy and commitments to refund investors and overhaul its leadership.
The SEC responded on June 14, arguing that Ripple’s comparison to Terraform Labs’ penalty is flawed. The regulator highlighted that Terraform’s penalty was based on gross profits from violations, amounting to over $3.5 billion, equating to nearly 12% of gross sales. Applying this ratio to Ripple’s case would result in a $102.6 million penalty, far below the SEC’s proposed $876.3 million.
The SEC emphasized that such a low penalty would undermine the purpose of civil penalty statutes. The proposed penalties for Ripple include nearly $2 billion, comprising $198.2 million in prejudgment interest, $876.3 million in civil penalties, and an additional $876.3 million in disgorgement.
The legal battle between Ripple and the SEC began in 2020, with the SEC alleging that Ripple sold unregistered securities. Judge Torres ruled in July 2023 that Ripple did indeed sell unregistered securities, but only to institutional investors.
In May, the SEC opposed Ripple’s attempt to seal certain financial details, arguing that the firm should disclose revenue generated from XRP sales deemed unregistered.
The SEC’s steadfast stance against Ripple’s plea underscores its commitment to enforcing securities laws and ensuring that penalties serve as a deterrent for future violations.