Ripple Fights SEC’s $2 Billion Fine Using Terraform Labs Case as Benchmark

• Ripple Labs is strategizing to reduce its penalty in the ongoing lawsuit with the U.S. Securities and Exchange Commission (SEC) by leveraging the fines imposed on Terraform Labs as a benchmark.
• The SEC is urging the court to impose a $2 billion fine on Ripple for allegedly selling XRP to institutional investors without proper registration.
• Ripple contends that the SEC’s penalty proposals are unreasonable, suggesting their own fine should be considerably lower.

Ripple seeks to reduce SEC fines by comparing its case to Terraform Labs

Ripple Considers Terraform Labs’ Penalty in SEC Battle

Ripple Labs has stated its intention to use the penalties administered to Terraform Labs in a different but related SEC lawsuit to argue for a reduction in its own financial penalties. The SEC has accused Ripple of selling $1.3 billion worth of XRP in unregistered securities transactions, and is seeking a punitive fine of $2 billion.

Ripple Draws Parallels to Terraform Labs

Amid the protracted legal dispute with the SEC, Ripple has consistently maintained that the regulatory body’s proposed financial penalties are disproportionate. In a recent statement, Ripple pointed out that Terraform Labs, under similar scrutiny, received a markedly lower fine despite more severe allegations. Terraform was fined $4.47 billion, which was later settled and approved by a judge. Ripple’s legal team argues that their penalty should be closer to $10 million, citing inconsistencies in the SEC’s penalty calculations.

Comparative Analysis of Penalties

Ripple’s lawyers argue that the stark disparity in penalties highlights an inconsistency in the SEC’s approach. They noted, “The SEC’s demands in the Ripple case starkly contrast with the penalties levied in similar or more severe cases.” They highlighted that the fines for similarly situated companies often only accounted for 0.6% to 1.8% of gross revenues, citing the Terraform case as an example.

Accusation of Fraud as a Differentiating Factor

Ripple’s defense also underscores the fact that, unlike Terraform Labs and its founder Do Kwon, Ripple has not been accused of fraud. The SEC’s argument hinges on the unregistered sale of securities rather than deceptive practices. “Despite the lack of fraud and minimal harm to institutional investors, the SEC’s proposed penalties are exorbitant,” the defense team stated. As of now, the SEC has yet to respond to Ripple’s latest assertions.

Conclusion

Ripple’s innovative legal strategy represents a significant development in its ongoing conflict with the SEC. By drawing comparisons to Terraform Labs, Ripple aims to spotlight discrepancies in the SEC’s penalty framework. This case could set a precedent for how financial penalties are assessed in similar regulatory disputes moving forward, potentially influencing future enforcement actions in the burgeoning cryptocurrency sector. Readers are encouraged to follow updates as the situation evolves.