The U.S. Securities and Exchange Commission (SEC) has dismissed Ripple Labs‘ request for a lower penalty, asserting that it would be insufficient and should not be compared to its settlement with Terraform Labs. On June 13, Ripple appealed to Judge Analisa Torres for a penalty “no more than $10 million,” significantly less than the SEC’s proposed $876.3 million civil penalty. Ripple referenced the SEC’s settlement with Terraform Labs as a precedent.
However, in a June 14 letter to Judge Torres, the SEC highlighted that its $4.5 billion settlement with Terraform Labs and its co-founder Do Kwon — which included a $420 million civil penalty — was due to the firm’s bankruptcy, their agreement to return funds to investors, and the dismissal of leaders responsible for the violations.
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The SEC emphasized, “Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing.”
Ripple argued that Terraform’s $420 million civil penalty was approximately 1.27% of its “$33 billion gross sales,” but the SEC countered, stating this wasn’t an “apples-to-apples comparison.” The SEC assessed Terraform‘s penalty against “the gross profit of the violative conduct,” estimated at over $3.5 billion, resulting in a nearly 12% ratio.
The SEC contended that applying the same ratio to Ripple‘s $876.3 million gross profits would result in a $102.6 million penalty, which would not fulfill the civil penalty statutes’ objectives.
The SEC’s proposed penalties for Ripple amount to nearly $2 billion, comprising $198.2 million in prejudgment interest, $876.3 million in civil penalties, and another $876.3 million in disgorgement.
This legal battle, ongoing since 2020, began when the SEC accused Ripple of selling unregistered securities. Judge Torres ruled in July 2023 that Ripple did indeed sell unregistered securities, but only to institutional investors. In May, the SEC opposed Ripple’s attempt to seal some financial details, insisting that the firm should disclose the revenue generated from XRP.
