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.
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.
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