The recent argument made by Ripple Labs for a lower penalty has been met with criticism from the United States Securities and Exchange Commission (SEC), who deemed it insufficient. Ripple had referenced the SEC’s settlement with Terraform Labs on June 13 while requesting Judge Analisa Torres of the United States District Court for the Southern District of New York for a penalty of no more than $10 million, a stark contrast to the regulator’s proposed $876.3 million civil penalty.
In response, the SEC stated in a letter dated June 14 that their $4.5 billion settlement with Terraform Labs and its co-founder Do Kwon, which included a $420 million civil penalty, was justified due to the firm’s bankruptcy, commitment to refund investors, and dismissal of leaders responsible for the violations. The SEC dismissed Ripple’s comparison of Terraform’s penalty to its gross sales, pointing out that the penalty should be measured against the gross profit of the violative conduct, resulting in a significantly higher ratio.
The SEC further argued that applying the same ratio to Ripple’s gross profits would result in a civil penalty of $102.6 million, far below the proposed $876.3 million. The SEC expressed concern that such a low penalty would not serve the intended purpose of civil penalty statutes. The total proposed penalties for Ripple amount to nearly $2 billion, including prejudgment interest, civil penalty, and disgorgement.
The ongoing legal battle between Ripple and the SEC began in 2020 when the SEC accused Ripple of selling unregistered securities. While Judge Torres acknowledged this violation in a ruling, it was specified that it applied only to sales made to institutional investors. In a separate development, the SEC objected to Ripple’s request to seal certain financial information, arguing that the firm should disclose revenue generated from unregistered sales of XRP.
In the realm of legal battles, the SEC faces a formidable opponent in the form of crypto’s legal firepower, reminiscent of a fierce battle between Godzilla and Kong.