The SEC Responds Strongly to Ripple’s Attempt to Reduce Fines
Ripple’s recent attempt to lessen the severity of its fines has been met with a firm response from the U.S. Securities and Exchange Commission (SEC).
In a legal filing, the San Francisco-based payments company referenced the SEC’s $4.47 billion settlement with Terraform Labs as evidence of the excessive civil penalty imposed in their own case, claiming it to be unreasonable.
However, the SEC countered this argument by stating that settlements have limited value in determining penalties for litigation, as per court documents shared by James K. Filan, a defense lawyer and crypto legal expert.
The SEC highlighted that the settlement with Terraform Labs involved the company being in bankruptcy, ceasing operations, relinquishing control of its crypto asset securities, returning funds to investors, and replacing board members responsible for the violations. These factors were crucial in reaching the settlement, which Ripple has not agreed to in its case.
Terraform Labs’ settlement, stemming from fraudulent activities related to TerraUSD and Luna, included significant disgorgement, civil fines, and penalties for its founder, Do Kwon.
Ripple’s lawyers argued that the civil penalty imposed on Terraform Labs represented a small percentage of its gross sales, which is in contrast to the SEC seeking a much higher penalty in Ripple’s case, despite no allegations of fraud or substantial losses to Institutional Buyers.
The SEC dismissed Ripple’s comparison, pointing out that the penalty should be assessed based on the gross profit of the violative conduct, resulting in a higher figure than Ripple’s proposed penalty.
The legal battle between Ripple and the SEC dates back to 2020 when the SEC accused Ripple of selling XRP as an unregistered security. While a judge ruled in favor of Ripple’s sales not constituting security offerings, they agreed that sales to institutional buyers did qualify as securities offerings.
The SEC has requested substantial disgorgement, interest, and civil penalties from Ripple, which the company believes to be excessive. Ripple’s lawyers have proposed a significantly lower penalty based on the company’s actual gross revenues.
As the legal battle continues, investors are advised to exercise caution and conduct thorough research before engaging in high-risk investments in the cryptocurrency market.
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