Ripple Labs Criticizes SEC’s $4.47 Billion Settlement Request in Terraform Labs Case

• Ripple Labs has expressed concerns over the proposed $4.47 billion settlement requested by the SEC in the Terraform Labs case.
• The cryptocurrency market is closely following this case due to its potential implications for future regulatory actions.
• A key point raised by Ripple is the disproportionate nature of the SEC’s penalty compared to previous cases.

Ripple criticizes the SEC’s hefty settlement proposal for Terraform Labs, arguing for a more reasonable penalty.

Ripple Challenges SEC’s $4.47 Billion Settlement Demand

Blockchain leader Ripple Labs Inc. has voiced its opposition to the U.S. Securities and Exchange Commission’s (SEC) proposed $4.47 billion settlement against Terraform Labs. Ripple argues that the settlement amount is excessively high and urges the court to consider a more balanced approach.

Unfair Penalty in Historical Context

On June 12, the SEC recommended that Terraform Labs and its founder Do Kwon pay $3.58 billion in disgorgement and an additional $420 million in a civil penalty. This settlement stems from allegations that Kwon misled investors about the company’s cryptocurrency products, ultimately causing losses of $40 billion. Ripple highlights that the SEC’s proposed settlement amounts to approximately 1.27% of Terraform Labs’ $33 billion total sales, which far exceeds penalties in other similar cases. Ripple has formally filed objections, pointing out historical precedents where the SEC’s penalties were significantly lower for more severe offenses.

Reasonable Penalties Suggested by Ripple

Ripple Labs contends that a $10 million cap on penalties would be more appropriate. A review of Terraform Labs’ finances shows the company lacks the resources to fulfill such an exorbitant settlement demand. With only $75 million in Assets Under Management (AUM), Terraform Labs is in no position to meet the SEC’s stringent financial expectations. Ripple argues that penalizing the company beyond its means serves no practical purpose and undermines its potential recovery and restitution efforts.

Community and Expert Reactions

Many industry observers have echoed Ripple’s stance, including top legal experts. Paul Grewal, Chief Legal Officer at Coinbase, has criticized the SEC’s position, questioning its effectiveness in resolving the issue meaningfully. Grewal suggests that a $7 million settlement would be sufficiently punitive while also feasible for Terraform Labs to manage. This case’s outcome is expected to set a precedent for other ongoing SEC litigation, including Ripple’s own legal battles with the regulator.

Conclusion

For now, the crypto community is waiting to see how the court will respond to Ripple’s objections and what this means for future regulatory practices. This case underlines the ongoing tension between regulatory authorities and innovative blockchain-based companies, emphasizing the need for balanced and fair legal frameworks. The outcome could significantly impact how similar cases will be handled, potentially guiding the way towards more equitable and sustainable penalties in the crypto industry.