The blockchain firm’s ongoing legal battle with the SEC dates back to December 2020, when the regulator accused Ripple of using XRP as an unregistered security to raise funds.
Ripple’s legal team has requested the court to consider a more reasonable civil penalty in its case with the U.S. Securities and Exchange Commission (SEC), drawing parallels to the recent settlement between the SEC and Terraform Labs.
In a June 13 filing with the U.S. District Court for the Southern District of New York, Ripple’s attorneys submitted a notice of supplemental authority. They argued that the SEC’s civil penalty demand was excessive, citing a $4.5 billion settlement in the Terraform case. Prior to this, a federal judge approved the deal between the SEC and Terraform Labs along with its co-founder, Do Kwon.
The SEC has demanded that Ripple pay around $2 billion in disgorgement, prejudgment interest, and civil penalties. In contrast, Ripple has argued for a penalty not exceeding $10 million. Ripple’s lawyers referenced penalties imposed in other SEC cases involving Block.one, Genesis Global Capital, and Telegram, noting that the specifics of Ripple’s gross revenue were redacted.
“As Ripple’s opposition explained, in comparable (and even more severe) cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues,” Ripple’s lawyers stated. “The Terraform case fits that pattern. Here, however, the SEC seeks a penalty far exceeding that range, despite no fraud allegations and minimal losses for Institutional Buyers. The Terraform settlement confirms that the Court should reject the SEC’s disproportionate request and that an appropriate penalty would be no more than $10 million.”
One of Crypto’s Longest Legal Battles
After a two-week trial in April, a jury found Kwon and Terraform liable for fraud. Conversely, Ripple’s case with the SEC has been ongoing since December 2020, when the regulator alleged that the blockchain company used XRP as an unregistered security to raise funds. A significant legal precedent was set in July 2023 when Judge Analisa Torres ruled that XRP was not a security concerning programmatic sales on exchanges.
The SEC moved to dismiss its case against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen in October 2023, indicating plans to discuss remedies with Ripple. Judge Torres initially scheduled the trial between Ripple and the SEC to start in April but postponed it indefinitely in October 2023. As of now, a new trial date has not been set.
Summary Review: The Ripple vs. SEC case highlights the ongoing tension between regulatory authorities and blockchain firms over the classification and regulation of cryptocurrencies. Ripple’s appeal for a reduced civil penalty, citing the recent Terraform Labs settlement, underscores the firm’s argument that the SEC’s demands are disproportionate. This case is pivotal as it could set a precedent for how similar cases are handled in the future, particularly concerning the penalties imposed on blockchain companies for regulatory breaches. As the legal battle continues, the outcome will be closely watched by the crypto community and regulators, potentially shaping the future landscape of cryptocurrency regulation and enforcement.
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