FameEX Hot Topics | SEC Denies Ripple’s Appeal for Lower Penalty

The United States Securities and Exchange Commission (SEC) has rejected Ripple Labs’ recent request for a lower penalty, stating that the proposed amount would be insufficient. On June 13, Ripple referenced the SEC’s settlement with Terraform Labs, asking for a penalty of “no more than $10 million,” which is significantly less than the SEC's proposed $876.3 million civil penalty.

In response, the SEC sent a letter to New York District Court Judge Analisa Torres on June 14, arguing that the circumstances surrounding its $4.5 billion settlement with Terraform Labs and its co-founder Do Kwon were different. The Terraform settlement, which includes a $420 million civil penalty, was influenced by the firm’s bankruptcy status, its commitment to return money to investors, and the dismissal of leaders responsible for the violations.

The SEC emphasized that Ripple’s situation is not comparable to Terraform’s, as Ripple has not agreed to any similar relief measures. Ripple’s reference to Terraform’s penalty, which was around 1.27% of its “$33 billion gross sales,” was dismissed as an “apples-to-oranges comparison” by the SEC. The regulator clarified that Terraform’s penalty was measured against the gross profit from the violative conduct, which was over $3.5 billion, resulting in a nearly 12% ratio.

Applying the same ratio to Ripple’s gross profits of $876.3 million would result in a civil penalty of $102.6 million. However, the SEC argued that such a low penalty would not meet the objectives of the civil penalty statutes.

The SEC has proposed total penalties for Ripple amounting to nearly $2 billion, including $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 has been ongoing since 2020, when the SEC accused Ripple of selling unregistered securities. Judge Torres ruled that Ripple did sell unregistered securities, but only to institutional investors.

Recently, the SEC objected to Ripple’s request to seal some of its financial information, insisting that the company should disclose the revenue earned from XRP sales. This ongoing dispute underscores the complexities and challenges involved in regulating and enforcing penalties in the rapidly evolving cryptocurrency market.

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