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SEC Rejects Ripple's Plea for Reduced Penalty

Key Takeaways

  • SEC dismisses Ripple's request for a reduced penalty, considering it insufficient;
  • Ripple sought a penalty cap of $10 million, much lower than the SEC's proposed $876.3 million civil penalty, citing the regulator's settlement with Terraform Labs;
  • The comparison with Terraform Labs' settlement was deemed invalid by the SEC.
SEC Rejects Ripple's Plea for Reduced Penalty

Ripple Labs' plea for a lower penalty has been dismissed by the United States Securities and Exchange Commission (SEC), which argued that the proposed reduction would be inadequate.

Ripple requested a reduced penalty on June 13, citing the SEC's recent settlement with Terraform Labs as a precedent. Ripple asked Judge Analisa Torres of the US District Court for the Southern District of New York to impose a penalty not exceeding $10 million, significantly less than the SEC's proposed $876.3 million civil penalty.

However, the SEC countered in a letter to Judge Torres on June 14, emphasizing that its $4.47 billion settlement with Terraform Labs and co-founder Do Kwon, which included a $420 million civil penalty, was due to the firm's bankruptcy, commitment to return funds to investors, and removal of leaders responsible for the violations.

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The SEC pointed out that comparing Terraform's $420 million penalty to Ripple's case was not valid, noting:

Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing.

The SEC explained that Terraform's penalty was measured against the gross profit from its violations, estimated at over $3.5 billion, equating to nearly 12%. Applying the same ratio to Ripple's gross earnings of $876.3 million, the civil penalty would be approximately $102.6 million.

The SEC argued that such a low penalty would not meet the objectives of civil penalty statutes. They maintain that the proposed penalties for Ripple, totaling nearly $2 billion, are justified. This includes $198.2 million in prejudgment interest, $876.3 million in civil penalties, and another $876.3 million in disgorgement.

The legal conflict between Ripple and the SEC dates back to 2020, when the SEC accused Ripple of selling unregistered securities. In a ruling from July 2023, Judge Torres agreed that Ripple had sold unregistered securities, but only to institutional investors.

Therefore, the SEC rejects Ripple's argument for a reduced penalty, maintaining that a significant penalty is necessary to meet legal standards and objectives.

Aaron S. , Editor-In-Chief
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.
With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.
Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.
Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.

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