The United States Securities and Exchange Commission has criticized Ripple Labs’ recent plea for a reduced penalty, arguing that it falls short of what is warranted.
Last week, Ripple referenced the SEC’s settlement with Terraform Labs as it once again petitioned New York District Court Judge Analisa Torres on June 13 for a penalty of “no more than $10 million” — significantly less than the SEC’s proposed $876.3 million civil penalty.
In response, the SEC countered in a letter to Judge Torres on June 14 that its $4.5 billion settlement with Terraform and co-founder Do Kwon, including a $420 million civil penalty, was justified due to Terraform’s bankruptcy, commitment to reimburse investors, and dismissal of the leaders responsible for the violations at the time.
The SEC criticized Ripple’s assertion that Terraform’s $420 million civil penalty amounted to approximately 1.27% of its “$33 billion gross sales,” stating it was not a comparable comparison.
The SEC compared Terraform’s penalty against “the gross profit of the violative conduct,” which it calculated to be over $3.5 billion, resulting in a ratio of nearly 12%.
Applying a similar ratio to Ripple’s requested disgorgement of $876.3 million based on its gross profits, the SEC estimated Ripple’s civil penalty would be $102.6 million.
The SEC asserted that such a low penalty would not fulfill the objectives of the civil penalty statutes.
The SEC has proposed penalties totaling nearly $2 billion for Ripple, comprising $198.2 million in prejudgment interest, a $876.3 million civil penalty, and another $876.3 million in disgorgement.
The legal dispute between the two entities began in 2020 when the SEC accused Ripple of selling unregistered securities. Judge Torres agreed with the SEC’s stance, noting the violations occurred specifically in sales to institutional investors.
Recently, the SEC contested Ripple’s request to keep some of its financial details confidential, arguing that Ripple should disclose the revenue it generated from XRP sales that Judge Torres ruled were unregistered.
[Note: The “tickers down $0.49” seems to be a financial update and is not necessary for the rewrite.]
