Ripple, SEC Clash Over Penalties in Final Reply Brief

Ripple vs. SEC case heats up with SEC’s final reply. SEC argues for penalties, Ripple refutes claims and proposes a lower fine.

The ongoing legal dispute between Ripple Labs and the United States Securities and Exchange Commission (SEC) has advanced substantially, with the SEC filing its final reply during the remedies phase of the litigation.  

Despite the court’s prior rejection of this “fair notice” defence, the SEC recently challenged Ripple’s assertion in its response to the remedies brief that the blockchain startup acted without recklessness and that there should be no “widespread uncertainty” regarding XRP’s legal status.

The SEC also maintains its position regarding the probability that Ripple will undertake comparable activities in the future. 

The SEC contests Ripple’s claims of cooperation.

According to the remedies brief, since the 2013 XRP initial coin offering, Ripple has attempted to minimize its liability while emphasizing its cooperation with the SEC.

Nevertheless, the SEC has noted that, by the law, another infraction is still conceivable, notwithstanding Ripple’s noncompliance since 2020.

According to the SEC, Ripple’s commitments to modify its behaviour in response to the litigation do not justify the avoidance of injunctions. It contends that Ripple needs to be more capable of comprehending the court order and disregarding its compliance implications.

In its response, the SEC contests Ripple’s claims concerning sales to accredited investors and activities conducted outside the United States. In light of the SEC’s arguments presented in the remedies brief, Stuart Alderoty, Ripple’s chief legal officer, commented on the SEC’s deteriorating reputation. 

“If you are a financial regulator outside the U.S. and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of fishing licenses.”

Stuart Alderoty, Ripple’s chief legal officer.

Similar to the issuance of fishing licenses, he suggested that the SEC’s actions might take aback international financial regulators with robust crypto licensing frameworks. Concerned for the resolution of the XRP litigation, Alderoty criticized the commission’s inconsistent application of the law and expressed optimism.

Notwithstanding Ripple’s assertions of exercising caution and reducing ambiguity regarding the legal standing of XRP, the SEC maintains its stance. It raises doubts regarding the probability of Ripple partaking in analogous conduct. 

Ripple has previously refuted a $2 billion penalty fine and most of the allegations.

Ripple recently expressed its dissent towards the $2 billion penalty demanded by the Securities and Exchange Commission (SEC), contending that the suggested penalties are excessively severe and disproportionate.

The company, represented by its defence attorney James Filan, lodged an elaborate motion contesting the SEC’s penalty demands and proposing an alternative penalty of $10 million, which was significantly reduced.

Opponents assert that the proposed penalties by the SEC are disproportionate to the actual circumstances of the case. Such severe financial penalties, according to Ripple, would not be justified by any allegations or findings of fraudulent or irresponsible conduct.

Furthermore, Ripple maintains that its XRP sales were carried out transparently, involving informed institutional investors who were completely aware of the transactions.

Ripple emphasizes its notable legal triumphs during the litigation, implying that the SEC’s penalty demands are at odds with the conclusions reached by the court.

In light of the absence of misconduct or fraud allegations in the case, the organization contends that the SEC’s request demonstrates persistent intimidation against the cryptocurrency industry in the United States.

Considering the company’s actions and the nature of the alleged violations, Ripple’s proposed $10 million penalty is considerably more reasonable.

Ripple argues that this sum would sufficiently fulfil the legal objectives without imposing an excessively severe penalty. Per analysts’ projections, a definitive verdict is anticipated in the case by September.

Regarding penalties, the court will decide; Ripple is sure of the judge’s impartiality during the final remedies phase.