The SEC has rejected Ripple’s request to reduce the civil penalty imposed by the regulator. Ripple had based this request on the settlement agreement reached by the SEC with Terraform Labs.
Comparison between Ripple and Terraform Labs
In June, Ripple cited the SEC’s settlement with Terraform Labs to argue for a maximum penalty of $10 million in front of Judge Analisa Torres. However, the SEC responded by stating that the $4.5 billion settlement with Terraform Labs was negotiated in a specific context: the company is bankrupt, has agreed to return funds to investors, and has dismissed the leaders involved in the violations.
SEC’s arguments against Ripple
The SEC highlighted that Ripple did not accept any of these restitution or restructuring conditions. Ripple claimed that Terraform’s $420 million penalty represented about 1.27% of its $33 billion gross sales, but the SEC deemed this comparison irrelevant.
Ripple does not accept any of this – in fact, Ripple accepts nothing at all. Such a low penalty would not fulfill the objectives of civil penalty laws.
SEC
The Terraform penalty was calculated based on the “gross profit from violative conduct” of over $3.5 billion, which is approximately 12%.
Calculation of the proposed penalties
Applying this same calculation method to Ripple, the SEC argued that the civil penalty should be $102.6 million, using a 12% ratio on the $876.3 million gross profits that Ripple would have to return. However, the SEC stated that such a low penalty would not fulfill the objectives of civil penalty statutes.
The total proposed penalties by the SEC for Ripple amount to nearly $2 billion, including $198.2 million in pre-judgment interest, $876.3 million in civil penalties, and $876.3 million in profit disgorgement.
The ongoing dispute between Ripple and the SEC
Since 2020, the SEC and Ripple have been engaged in a legal battle. The SEC accuses Ripple of selling unregistered securities, which Judge Torres partially confirmed in July 2023, stating that these sales were illegal when made to institutional investors.
In May, the SEC also challenged Ripple’s request to seal some of its financial documents, arguing that the company had to disclose revenues from XRP sales, which Judge Torres had deemed unregistered.
