SEC Rejects Ripple’s Appeal for Lower Penalty

The SEC contended that Ripple’s proposed reduced civil sanction would not be sufficient and that there is no comparable settlement with Terraform Labs

The United States Securities and Exchange Commission has criticized Ripple Labs’ most recent argument for a reduced penalty, contending that it is insufficient.

Ripple requested a penalty of “no more than $10 million” from New York District Court Judge Analisa Torres on June 13, citing the SEC’s settlement with Terraform Labs. This amount is significantly lower than the regulator’s proposed $876.3 million civil penalty.

The Securities and Exchange Commission (SEC) argued in a June 14 letter to Judge Torres that the $4.5 billion settlement with Terraform and co-founder Do Kwon, which included a $420 million civil penalty, was made because the firm is bankrupt, has agreed to return money to investors, and has fired leaders who were in charge at the time of the violations. This argument was made a day later.

“Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing.”

The SEC argued that Ripple’s assertion that Terraform’s $420 million civil penalty was approximately 1.27% of its “$33 billion gross sales” was not an “apples-to-apples comparison.”

The SEC also determined that Terraform’s penalty was nearly 12% when measured against “the gross profit of the violative conduct,” estimated to be over $3.5 billion.

The regulator contended that the civil sanction assessed against Ripple would be $102.6 million if the same ratio were applied to the $876.3 million of Ripple’s gross profits that it requested to be disgorged.

“The objectives of the civil penalty statutes would not be met by such a low penalty,” the SEC stated.

The SEC’s proposed penalties for Ripple come to a total of nearly $2 billion. This includes $198.2 million in prejudgment interest, $876.3 million in civil penalty, and an additional $876.3 million in disgorgement.

The two have been embroiled in a legal dispute since 2020 when the Securities and Exchange Commission (SEC) claimed that Ripple sold unregistered securities. Judge Torres acknowledged this was the case only when the securities were sold to institutional investors.

The SEC objected to Ripple’s attempt to conceal certain financial details last month, contending that the company should disclose the revenue generated from XRP XRP$0.49 Sales that Judge Torres determined were unregistered.