SEC Counters Ripple’s Bid to Reduce $1.95 Billion Fine Amid Terraform Settlement Comparison

• The U.S. Securities and Exchange Commission (SEC) recently countered Ripple’s attempt to lessen its fines.
• Ripple highlighted the SEC’s $4.47 billion settlement with Terraform Labs to illustrate the perceived unfairness of its own penalties.
• The SEC contends that settlements don’t necessarily set precedents for litigation penalties, as seen in court documents shared by crypto legal expert James K. Filan.

Ripple Faces SEC Resistance in Bid to Reduce Penalties Amid Terraform Labs Comparisons

SEC Counters Ripple’s Fine Reduction Motion

The Securities and Exchange Commission has firmly opposed Ripple’s recent motion to lessen the severity of penalties levied against it. This dispute follows Ripple’s comparison of its situation with Terraform Labs’ recent settlement. Specifically, Ripple has argued that the hefty penalty imposed on it is excessive compared to the SEC’s $4.47 billion settlement with Terraform Labs.

SEC’s Stance on Settlements vs. Litigation

According to court documents shared by James K. Filan, the SEC maintains that settlement outcomes have limited relevance in determining penalties for cases under litigation. The regulator asserts that different circumstances, such as Terraform going out of business and agreeing to additional remedial measures, played a significant role in the settlement terms. In contrast, Ripple is unwilling to accept any similar forms of relief.

Context of Terraform Labs Settlement

Terraform Labs, which faced legal actions for defrauding investors of $40 billion during the TerraUSD and Luna collapse, ended up agreeing to a settlement requiring them to pay $4.05 billion in disgorgement, plus a civil fine and penalties totaling $500 million. This significant enforcement action by the SEC has been used by Ripple as a benchmark in its arguments for penalty reductions.

Ripple’s Argument on Penalty Proportionality

Ripple’s defense highlights that the $420 million civil penalty on Terraform Labs amounted to approximately 1.27% of its gross sales. They argue that, traditionally, the SEC has agreed to penalties ranging from 0.6% to 1.8% of gross revenues in similar scenarios, and thus Ripple’s penalty should be aligned accordingly. Conversely, the SEC argues that Ripple’s comparison is not valid, pointing out that if the penalty were to be calculated based on gross profits, it would yield a much larger figure than Ripple’s proposed $10 million.

Ongoing Legal Battle

The SEC initially brought a lawsuit against Ripple in late 2020, accusing the company of selling XRP as an unregistered security. Although last year, US District Judge Analisa Torres ruled that Ripple’s automated, open-market sales of XRP did not classify as security offerings, she agreed with the SEC that institutional sales were indeed securities offerings. The court ordered Ripple to pay nearly $1.95 billion in disgorgement, prejudgment interest, and civil penalties—an amount Ripple is contesting.

Conclusion

As the legal tug-of-war continues, Ripple is steadfast in its commitment to reducing its penalties, contending that the SEC’s demands are disproportionate. What’s clear is that this case will likely set significant precedents for future regulatory actions in the rapidly evolving cryptocurrency sector. Stakeholders in the crypto community are closely watching as the court deliberates on what could be a landmark decision with far-reaching implications.