Ripple Asserts Fair Penalty in SEC Case, Citing XRP Non-Fraud Allegations

• The cryptocurrency sector is witnessing a pivotal legal confrontation between Ripple Labs Inc. and the US Securities and Exchange Commission (SEC).
• This ongoing legal tussle has significant ramifications for Ripple and the broader crypto market.
• In a strategic move, Ripple has recently filed a notice of supplemental authority with the Southern District of New York, potentially shifting the judicial view on the SEC’s demands.

Ripple’s strategic court filing aims to influence the outcome of its legal battle with the SEC, drawing comparisons to another significant case.

Ripple Vs. SEC Court Update

Recently, in their ongoing lawsuit, Ripple’s legal team highlighted a striking similarity with the SEC’s recent case against Terraform Labs. In their analysis, they contend that the SEC’s approach to penalties in these cases demonstrates a notable inconsistency. The SEC accused Terraform Labs and its CEO, Do Hyeong Kwon, of running one of the largest securities frauds in U.S. history.

Comparison with Terraform Labs Case

On June 12, 2024, the court finalized a consent judgment against Terraform Labs, mandating a $3.59 billion disgorgement and a $420 million civil penalty, which equals around 1.27% of Terraform’s total sales of $33 billion. Ripple’s attorneys have seized this opportunity to question the proportionality of the SEC’s demands in their own case, arguing that the discrepancy highlights unfair treatment.

Disparity in Penalties

Unlike Terraform, which faced severe fraud allegations leading to massive investor losses, Ripple’s case includes no such fraud charges. Ripple’s legal team has underscored the stark difference in penalties, highlighting that in similar past cases, penalties ranged merely between 0.6% and 1.8% of defendants’ gross revenues. They argue that the SEC’s demand for Ripple is excessively high and lacks precedent, given no direct investor losses are involved.

Legal Argument for Proportional Penalties

The notice submitted by Ripple’s legal representatives, led by Michael K. Kellogg, insists on a proportional penalty. Through this notice, Ripple proposes a civil penalty cap of $10 million, starkly contrasting with the SEC’s proposed $2 billion fine for Ripple’s XRP sales to institutional investors. Their core argument is that the SEC’s demands are unjustified and excessive.

Conclusion

In conclusion, Ripple’s recent legal maneuver aims to challenge the SEC’s penalty demands by presenting a well-reasoned argument based on recent precedents. Their strategy revolves around highlighting perceived inconsistencies in the SEC’s application of penalties in similar cases. This legal approach could influence the final judgment, potentially leading to a more favorable outcome for Ripple.