Legal representatives for Ripple, a blockchain company, have urged a court to consider an “appropriate” civil penalty in their ongoing case against the United States Securities and Exchange Commission (SEC) following a settlement reached between the regulator and Terraform Labs.
In a recent filing on June 13 in the U.S. District Court for the Southern District of New York, Ripple’s legal team submitted a notice of supplemental authority highlighting the perceived “unreasonableness” of the SEC’s civil penalty, pointing to the settlement in the Terraform case. Prior to Ripple’s filing, a federal judge approved a $4.5 billion agreement between the SEC and Terraform Labs, including its co-founder Do Kwon.
The SEC has requested that Ripple pay around $2 billion in disgorgement, prejudgment interest, and civil penalties, while Ripple has argued for a penalty no greater than $10 million. Ripple’s lawyers have drawn comparisons to penalties imposed by the SEC in cases against Block.one, Genesis Global Capital, and Telegram, noting that the filing redacted information regarding the firm’s gross revenue.
Ripple’s legal team stated, “In similar cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues, but Terraform’s settlement deviates from that pattern. The SEC’s request for a civil penalty exceeding this range is unwarranted, especially in a case with no allegations of fraud and insignificant losses to Institutional Buyers. Terraform’s case underscores the need for the court to reject the SEC’s excessive request and impose a more reasonable civil penalty not exceeding $10 million.”
The legal battle between Ripple and the SEC has been one of the longest-standing in the crypto industry. Following a two-week trial in April, Kwon and Terraform were found liable for fraud. In contrast, Ripple’s case with the SEC began in December 2020 when the regulator accused the blockchain company of using XRP as an unregistered security to raise capital. Judge Analisa Torres set a significant legal precedent in July 2023 when ruling that XRP tokens were not securities in terms of programmatic sales on exchanges.
In October 2023, the SEC moved to dismiss its case against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen, indicating plans to discuss remedies with the blockchain firm. Although Judge Torres had initially scheduled the trial to begin in April, the proceeding was adjourned in October 2023 with no set date for resumption. The publication date of this article does not provide clarity on when the trial might be rescheduled.
In the world of crypto, the SEC faces a fierce battle against the legal firepower of companies like Ripple, reminiscent of the clash between Godzilla and Kong.