Ripple is referencing the recent settlement between Terraform Labs as they seek to lessen their own penalty imposed by the U.S. Securities and Exchange Commission (SEC).
Earlier this week, the SEC finalized a settlement of $4.47 billion with Terraform Labs after discovering that the stablecoin company had deceived investors out of $40 billion during the 2022 TerraUSD and Luna collapse. The settlement includes $4.05 billion in disgorgement along with interest, in addition to a civil fine of $420 million, and an $80 million penalty for the company’s founder, Do Kwon.
According to court documents shared by James K. Filan, a defense attorney and crypto legal expert, Ripple’s legal team points out that the $420 million civil penalty represents approximately 1.27% of Terraform Labs’ $33 billion gross sales. They argue that this penalty showcases the unfairness of the civil penalty imposed by the SEC in their own case.
Ripple’s lawyers highlight that in similar cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues, even in more severe situations. They note that Terraform Labs falls within this pattern, while the SEC is seeking a civil penalty that exceeds this range, despite no allegations of fraud in the case and minimal 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 programmatic sales of XRP were not considered security offerings, contrary to the SEC’s claims. However, she did agree that Ripple’s direct sales of XRP to institutional buyers constituted securities offerings.
In March, the SEC requested the court to mandate the payment of $876,308,712 in disgorgement, $198,150,940 in prejudgment interest, and a $876,308,712 civil penalty from Ripple, totaling around $1.95 billion. Ripple’s legal team has argued that $10 million would be a more suitable reflection of the company’s actual gross revenues from pre-complaint institutional sales.
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