Ripple Labs aims to leverage the recent SEC settlement with Terraform Labs to reduce its nearly $2 billion proposed penalty to $10 million, as revealed in a “notice of supplemental authority” posted on Thursday.
A Push To Lower The Settlement Amount
Ripple argues that the $2 billion penalty proposed by the SEC for offering XRP tokens to institutions is excessive and should be closer to $10 million. The blockchain company’s lawyers state, “The civil penalty sought by the SEC in Terraform demonstrates the unreasonableness of the civil penalty sought by the SEC in this case.”
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As Ripple’s opposition explained, comparable (and even more egregious) cases, SEC agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s revenues. Terraform fits that pattern.” Ripple also points out the differences in allegations. While Terraform Labs faced civil fraud charges, Ripple has only been accused of distributing unregistered securities. “Here, by contrast, the SEC seeks a civil penalty far exceeding that range, even though there are no allegations of fraud in this case and Institutional Buyers did not suffer substantial losses,”
Related article: Ripple and SEC Clash Over Sealing Financial Details of XRP Sales
Ripple’s lawyers add. “Terraform thus confirms that the Court should reject the SEC’s disproportionate and unprecedented request and that an appropriate civil penalty would be no more than $10 million.”
A Long-Running Court Battle
Ripple has been entangled in a lengthy legal battle with the SEC since December 2020. The SEC claims Ripple’s sale of XRP tokens to retail and institutional investors raised over $1.3 billion in unregistered securities. Initially, SEC also targeted Ripple’s CEO, Brad Garlinghouse, and Co-Founder, Chris Larsen in the lawsuit, but dropped charges against them.
Related article: Ripple v. SEC: The Key Factor Delaying Final Judgment
Notably, in July, a New York federal court ruled that the sale of XRP on exchanges and through algorithms did not violate any American securities laws; however, sales to institutions did. Consequently, in March, the SEC proposed $1.95 billion in recovery and civil penalties from Ripple, which the company strongly opposed. Meanwhile, a US court approved the SEC’s settlement with Terraform Labs and its former CEO, Do Kwon, on Thursday.
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This settlement involves more than $4.47 billion in combined recovery and penalties. Kwon, facing possible extradition from Montenegro, will personally pay over $204 million. Ripple cites this settlement to highlight the inconsistency in SEC’s penalty, arguing for a more reasonable penalty in its case.
