As a seasoned crypto investor with a keen interest in the regulatory landscape of the industry, I find the ongoing dispute between Ripple and the US Securities and Exchange Commission (SEC) to be a pivotal moment for the future of digital asset markets. The latest turn of events, where the SEC has rejected Ripple’s demand to lower the penalty to a mere $10 million based on the comparison with Terraform Labs’ settlement, is not unexpected but still disappointing.
The SEC has denied Ripple‘s recent request to reduce the proposed penalty from $2 billion, stating that this amount is insufficient.
Last week, Ripple referred to the SEC’s $4.5 billion settlement with Terraform Labs as a point of comparison when asking Judge Analisa Torres of the United States District Court for the Southern District of New York to reconsider the proposed penalty of up to $10 million, which is significantly lower than the SEC’s suggested penalty of $876.3 million.
Ripple contended that the $420 million penalty imposed by the SEC on Terraform Labs equated to only approximately 1.27% of their reported $33 billion in total sales. However, the SEC disputed this assessment, deeming it an invalid comparison due to the inherent differences between gross sales and penalties.
A day after the SEC’s letter to Torres, it stated that its previous settlement with Terraform Labs and Do Kwon no longer applied since the company was insolvent and had committed to refunding investor funds while dismissing those in charge during the violation period. In contrast, Ripple unequivocally rejects this proposed relief – they are not in agreement with anything the SEC proposes.
The SEC imposed a penalty on Terraform based on the total earnings generated from the infringing actions, which exceeded $3.5 billion or around 12% of the overall amount. Following a comparable methodology, the SEC calculated that Ripple’s civil penalty would be approximately $102.6 million if assessed against the $876.3 million in gross profits the SEC sought to recover from Ripple.
“That low of a penalty would not satisfy the purposes of the civil penalty statutes,” the SEC said.
SEC Has Proposed Nearly $2B in Penalties against Ripple
Based on the initial proposal from the US Securities and Exchange Commission (SEC), Ripple was facing a total penalty of approximately $2 billion. This consisted of a civil penalty amounting to $876 million, $198 million in pre-judgment interest, and an additional $876.3 million in disgorgement.
Back in 2020, the Securities and Exchange Commission (SEC) accused Ripple of selling unregistered securities. This long-standing disagreement between the two parties reached a milestone in July 2023 when Judge Torres made a decision recognizing that Ripple indeed engaged in such violations, but only with respect to sales targeted at institutional investors.
In May, the Securities and Exchange Commission (SEC) objected to Ripple’s effort to conceal financial documents, advocating for their public disclosure. These records pertain to income derived from XRP sales, which a judge had earlier ruled were carried out without the necessary registration.
The Securities and Exchange Commission (SEC) has shown strong opposition. Ripple responded, maintaining an unyielding stance. A judge recently ruled that XRP does not classify as a security. No parties require compensation. And in a significant blow to the SEC, Ripple’s success continues to flourish. However, the SEC appears to have dropped its excessive demand for $2 billion. – Ripple’s Chief Legal Officer Stuart Alderoty expressed.
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2024-06-17 12:21