Ripple Seeks to Reduce SEC Fine to $10 Million
Ripple Labs submitted a letter requesting a reduction of the SEC fine from $2 billion to $10 million. The company cited the agreement between the regulator and Terraform Labs (TFL) as a precedent.
On June 12, TFL agreed to pay $4.47 billion. The court approved the deal, which includes $3.58 billion in compensation, a $420 million civil penalty, and a ban on TFL co-founder Do Kwon from holding executive positions in public companies. Kwon personally contributed $204 million to the “company’s assets for distribution to affected investors.”
Ripple argues that the civil penalty for Terraform Labs “amounts to approximately 1.27% of the defendants’ gross sales of $33 billion.” In other cases, the SEC imposed penalties “ranging from 0.6% to 1.8% of the defendant’s gross [sales].”
The SEC demands Ripple pay a $2 billion fine including interest. The company’s lawyers stated that this amount “significantly exceeds” the mentioned range, despite the absence of fraud charges and substantial investor losses in the case.
“The civil penalty the SEC demanded for Terraform demonstrates [its] unreasonableness, which the SEC demanded in the case of [Ripple],” the lawyers stated.
In May, the Commission rejected the company’s call to reduce the fine to $10 million, describing the proposed amount as “a slap on the wrist.”
SEC representatives, in a response letter to Judge Analisa Torres, deemed Ripple’s proposed fine insufficient.
#XRPCommunity #SECGov v. #Ripple #XRP @SECGov has responded to @Ripple’s letter regarding the TerraForm Labs Consent Judgment. pic.twitter.com/VvGSJffwa8
— James K. Filan ???? (@FilanLaw) June 14, 2024
The Commission noted that the settlement with TFL was reached because the firm is bankrupt, agreed to return funds to investors, and dismissed executives “who were responsible at the time of the violations.”
“Ripple does not agree to any of these concessions — in fact, Ripple agrees to nothing,” the document states.
The company’s arguments regarding gross sales were not considered “a comparable comparison” by the Commission. The penalty using the formula would amount to $102.6 million, which the regulator deems low and “not in line with the goals of civil penalty laws.”
Commenting on the penalty for TFL, Ripple’s chief legal officer Stuart Alderoty remarked that the SEC is concerned with attracting media attention to its actions.
This SEC is again touting a big penalty — but the SEC actually will end up a creditor in bankruptcy court (see BlockFi). The SEC has become a show regulator chasing headlines rather than good policy. https://t.co/RaQfpuAKOH
— Stuart Alderoty (@s_alderoty) June 12, 2024
“The SEC has become a show regulator chasing headlines rather than good policy,” Alderoty wrote.
In December 2020, the Commission filed a lawsuit against the firm, accusing it of selling unregistered securities in the form of XRP worth approximately $1.3 billion. CEO Brad Garlinghouse and co-founder Chris Larsen were also named as defendants.
In July 2023, Judge Analisa Torres ruled in favor of Ripple. She determined that programmatic sales and other distributions of the token do not constitute an offer and sale of investment contracts. However, according to the verdict, sales of the coins to major industry players violated U.S. securities laws.
In October, the SEC dropped charges against Garlinghouse and Larsen.
The case regarding institutional sales of XRP by the company continues. In February 2024, a district judge granted the regulator’s motion regarding the provision of Ripple’s financial data and token sales to major investors.
In February, an updated class action lawsuit was filed against Ripple, alleging violations of securities laws.
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