The United States Securities and Exchange Commission (SEC) has expressed dissatisfaction with Ripple Labs' recent plea for a reduced penalty, stating that the proposed reduction would not suffice. Ripple, in an attempt to justify a lesser penalty, referenced the SEC's agreement with Terraform Labs to New York District Court Judge Analisa Torres. The company proposed a penalty of no more than $10 million, significantly lower than the SEC's suggested $876.3 million civil penalty.
In response to Ripple's argument, the SEC issued a letter to Judge Torres, highlighting its $4.5 billion settlement with Terraform and co-founder Do Kwon. The SEC emphasized that this settlement, including a $420 million civil penalty, was reached because the firm was financially distressed, committed to repaying investors, and terminated the leaders responsible during the violations.
The SEC rejected the analogy made by Ripple regarding Terraform's penalty, pointing out that comparing the $420 million civil penalty to Terraform's $33 billion gross sales was not a valid comparison. Instead, the SEC assessed Terraform's penalty based on the gross profit from the misconduct, which amounted to over $3.5 billion, representing a nearly 12% ratio.
Refuting Ripple's argument further, the SEC projected that Ripple's civil penalty should be around $102.6 million if the same ratio was applied to the $876.3 million in gross profits Ripple was requested to disgorge. The SEC contended that such a low penalty would not align with the objectives of civil penalty statutes.
The SEC's proposed penalties against Ripple sum up to nearly $2 billion, comprising $198.2 million in prejudgment interest, $876.3 million in civil penalty, and an additional $876.3 million in disgorgement. The legal battle between Ripple and the SEC commenced in 2020 following allegations from the SEC that Ripple conducted unregistered securities sales, a claim corroborated by Judge Torres, particularly in transactions involving institutional investors.
Recently, the SEC opposed Ripple's motion to seal certain financial information, insisting that Ripple ought to disclose the revenue generated from XRP sales, which were deemed unregistered by Judge Torres. The ongoing dispute between Ripple and the SEC has been closely scrutinized, reflecting the complex interplay between regulatory oversight and the crypto industry's legal landscape.
