The appeal of Ripple Labs to lessen its civil penalty has been decisively denied by the U.S. Securities and Exchange Commission (SEC). Compared to the SEC’s proposed $876.3 million fine, Ripple had asked for a maximum fine of $10 million. The SEC contended that Ripple’s desired goal would not be fulfilled by the lesser fine.
To reduce its fine, Ripple pointed to the recent settlement between Terraform Labs and the SEC. Ripple made mention of the $4.5 billion settlement, which included a $420 million civil penalty, between the SEC and Terraform Labs on June 13. Ripple contended that a comparable modification to its penalty was warranted.
A Manhattan jury finds Terraform Labs guilty of fraud in April 2024. Because of this, even though Terraform Labs only had $75 million in known assets, it consented to a $4.47 billion settlement with the SEC.
SEC’s Firm Response to Ripple’s Argument
In response, the SEC wrote to Judge Analisa Torres of the New York District Court, arguing that the circumstances were not similar. The SEC emphasized that Terraform Labs had declared bankruptcy, committed to repay investors their money, and fired the executives in charge of the infractions. Ripple, on the other hand, had declined to take any such action.
The SEC further stated that Terraform Labs’ $420 million civil penalty was calculated using 12% of the nearly $3.5 billion in gross profit that the company made from the illegal activity. If the same percentage were applied to Ripple’s case, the SEC’s requested gross profits of $876.3 million would have resulted in a $102.6 million civil penalty.
The SEC argued that the deterrent and accountability-enforcing nature of civil penalty provisions would not be achieved by imposing a small penalty.
The Cost of Non-Compliance: Ripple Faces Hefty Penalties
The SEC is recommending steep fines for Ripple, totaling close to $2 billion. Prejudgment interest of $198.2 million, civil penalties of $876.3 million, and disgorgement of an additional $876.3 million are included in this. These numbers support the SEC’s position that fines ought to be severe enough to serve as a deterrence and preserve the integrity of the financial system.
The SEC accused Ripple of selling unregistered securities in 2020, sparking a court battle between the two organizations. Judge Torres came to the conclusion that Ripple did, in fact, sell securities but only to accredited investors without the required registration.
The SEC recently objected to the confidentiality of some Ripple papers and demanded that Ripple reveal the money it made from selling XRP, the cryptocurrency that is at the center of the dispute.
The fact that the SEC rejected Ripple’s request to have the penalty reduced shows that the two sides are still unable to come to an agreement. The SEC is unwavering in its pursuit of severe sanctions to guarantee compliance and stop further wrongdoing in the Bitcoin sector, even while this court struggle drags on.
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