Malaysian Authorities Crack Down on Crypto Tax Dodgers Amidst Ripple’s Legal Battle with SEC

• Authorities in Malaysia have begun to target cryptocurrency investors who evade taxes.
• Ripple’s legal team references the SEC’s recent case against Terraform Labs to argue for a reduced penalty.
• However, the regulatory body countered this claim in a letter to Judge Torres a day later.

Discover how Malaysia is tackling crypto tax evasion and the latest developments in the Ripple vs. SEC legal battle.

Malaysia Cracks Down on Crypto Tax Evasion

Malaysia’s Inland Revenue Board (IRB) is stepping up its efforts to curb tax evasion in the cryptocurrency sector with a special operation named “Ops Token.”

According to local reports, the IRB, in collaboration with Royal Malaysia Police and Malaysia Cyber Security (CSM), conducted raids on 10 different locations in Klang Valley. The IRB stated:

“During the operation, we uncovered cryptocurrency trading data stored on mobile devices and computers, enabling us to determine the value of the traded digital assets, which revealed a significant tax revenue leakage.”

IRB CEO Datuk Abu Tariq Jamaluddin warned cryptocurrency traders to properly declare their crypto earnings at the nearest IRB offices as soon as possible before compliance measures are enforced.

SEC Challenges Ripple’s Plea for Lower Penalty

The United States Securities and Exchange Commission (SEC) has rebuffed Ripple Labs’ argument for a reduced penalty, deeming it insufficient.

Last week, Ripple referenced the SEC’s settlement with Terraform Labs to request a penalty “not exceeding $10 million,” starkly contrasting the SEC’s proposed $876.3 million fine.

However, in a letter dated June 14, the SEC contended that the two cases shouldn’t be directly compared, asserting that the proposed lower penalty wouldn’t fulfill the objectives of civil penalty statutes. The SEC elaborated:

The total penalties the SEC is recommending for Ripple amount to nearly $2 billion, including $198.2 million in prejudgment interest, $876.3 million in civil penalties, and an additional $876.3 million in disgorgement.

The legal battle between the SEC and Ripple, which began in 2020, centers around the SEC’s allegation that Ripple sold unregistered securities to institutional investors, a claim that Judge Torres has acknowledged.

Ripple’s Lawyers Seek Fair Civil Penalty Amid Ongoing Case

Ripple’s counsel has petitioned the court to assess “reasonable” civil penalties in the ongoing lawsuit with the SEC. In a filing made on June 13 in the U.S. District Court for the Southern District of New York, Ripple’s attorneys argued against the hefty fines sought by the SEC, citing it as “unreasonable” and submitting additional authority notifications.

They pointed to a recent $4.5 billion settlement between the SEC and Terraform Labs earlier this week. The SEC is seeking approximately $2 billion from Ripple in penalties. However, the blockchain company believes it should not pay more than $10 million.

In a statement, Ripple’s lawyers noted, “As highlighted in Ripple’s opposition, in comparable (and even more severe) cases, the SEC has settled for penalties ranging from 0.6% to 1.8% of the defendant’s gross revenue. Terraform fits within this model. Here, however, the SEC is demanding penalties far above this range despite no allegations of fraud in this case and minimal losses sustained by Institutional Buyers.”

Conclusion

In summary, Malaysia’s aggressive stance on crypto tax evasion reflects a broader trend of increasing regulatory scrutiny in the crypto space. Meanwhile, the SEC and Ripple’s ongoing legal tussle highlights the complexities of regulating digital assets. As these developments unfold, stakeholders must stay informed and prepared for the evolving landscape of cryptocurrency regulation and compliance.