Ripple is looking to the recent settlement reached by Terraform Labs as a way to potentially reduce their own penalty from the U.S. Securities and Exchange Commission (SEC). The SEC recently finalized a settlement of $4.47 billion with Terraform Labs after the stablecoin company was found guilty of defrauding investors of $40 billion in the 2022 TerraUSD and Luna collapse. This settlement includes $4.05 billion in disgorgement with interest, along with a civil fine of $420 million, and an additional penalty of $80 million for the founder, Do Kwon.

Ripple’s legal team has pointed out that the $420 million civil penalty amounts to approximately 1.27% of Terraform Labs’ $33 billion gross sales. They argue that this penalty highlights the unreasonable nature of the civil penalty imposed by the SEC in their own case. According to court documents shared by James K. Filan, a defense attorney and crypto legal expert, in comparable cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues. Ripple’s lawyers stress that the SEC is seeking a civil penalty well above this range, despite the absence of fraud allegations in their case and the lack of substantial losses suffered by Institutional Buyers.

The SEC initially filed a lawsuit against the San Francisco-based payments company in late 2020 for allegedly selling XRP as an unregistered security. Last summer, US District Judge Analisa Torres ruled that Ripple’s automated open-market sales of XRP, known as programmatic sales, did not constitute security offerings, contrary to the SEC’s claims. However, the judge did agree with the SEC’s argument that Ripple’s direct sale of XRP to institutional buyers qualified as a securities offering.

In March, the SEC requested the court to mandate Ripple to pay $876,308,712 in disgorgement, $198,150,940 in prejudgment interest, and a $876,308,712 civil penalty, totaling approximately $1.95 billion. Ripple’s legal team has contended that a $10 million penalty would be more appropriate, reflecting a reasonable percentage of the company’s actual gross revenues from pre-complaint institutional sales.

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