The SEC Responds to Ripple’s Attempt to Reduce Fines

In response to Ripple’s recent attempt to lessen the severity of its fines, the U.S. Securities and Exchange Commission (SEC) has pushed back. Last week, the San Francisco payments company cited the SEC’s $4.47 billion settlement with Terraform Labs as evidence of the excessive nature of the civil penalty imposed by the SEC in their case.

Court documents, shared by James K. Filan, a defense lawyer and crypto legal expert, reveal that the SEC believes settlements have limited value in determining penalties for litigation. The SEC argues that Ripple’s comparison to the Terraform settlement is flawed, as the circumstances of the two cases differ significantly.

The SEC points out that Terraform Labs, which settled after being found liable for defrauding investors of $40 billion in the 2022 TerraUSD and Luna collapse, is in bankruptcy and going out of business. The settlement includes $4.05 billion in disgorgement, a $420 million civil fine, and an $80 million penalty for the firm’s founder, Do Kwon.

Ripple’s attorneys argue that the $420 million civil penalty represents only 1.27% of Terraform Labs’ $33 billion gross sales. They claim that in similar cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues. However, the SEC contends that Ripple’s comparison is inaccurate and that a lower penalty would not serve the purposes of civil penalty statutes.

The SEC first sued Ripple in late 2020 for allegedly selling XRP as an unregistered security. While a judge ruled that Ripple’s automated sales of XRP did not constitute security offerings, the SEC’s claim that sales to institutional buyers were securities offerings was upheld.

In March, the SEC requested that Ripple pay $876,308,712 in disgorgement, $198,150,940 in prejudgment interest, and a $876,308,712 civil penalty, totaling around $1.95 billion. Ripple’s lawyers argue that a $10 million penalty would be more appropriate based on the company’s actual gross revenues.

It remains to be seen how this legal battle between Ripple and the SEC will unfold. Stay tuned for updates on this ongoing dispute.