Attorneys representing blockchain company Ripple have urged a court to consider an “appropriate” civil penalty in their case against the United States Securities and Exchange Commission (SEC) following a settlement reached by the SEC with Terraform Labs.
In a filing dated June 13 in the U.S. District Court for the Southern District of New York, Ripple’s legal team submitted a notice of supplemental authority questioning the fairness of the SEC’s civil penalty, pointing to the settlement in the Terraform case. Prior to Ripple’s filing, a federal judge approved a $4.5 billion agreement between the SEC and Terraform Labs, along with its co-founder Do Kwon.
The SEC has demanded that Ripple pay approximately $2 billion in disgorgement, prejudgment interest, and civil penalties, while Ripple has argued for a penalty of no more than $10 million. Ripple’s attorneys have drawn parallels to penalties imposed in the SEC’s previous cases involving Block.one, Genesis Global Capital, and Telegram, although certain details regarding the firm’s revenues were redacted in the filing.
“Ripple’s opposition highlighted that in similar (and even more severe) cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues,” stated Ripple’s lawyers. “Terraform aligns with this pattern. However, the SEC is seeking a civil penalty that far exceeds this range, despite the absence of fraud allegations in this case and the lack of substantial losses suffered by Institutional Buyers. Therefore, Terraform’s case confirms that the SEC’s request is disproportionate and unprecedented, and an appropriate civil penalty would be no more than $10 million.”
After a lengthy legal battle, a jury found Kwon and Terraform guilty of fraud following a two-week trial in April. On the other hand, Ripple’s dispute with the SEC dates back to December 2020 when the regulator accused the blockchain company of utilizing XRP as an unregistered security to raise funds. In July 2023, Judge Analisa Torres set a significant legal precedent by ruling that the XRP token was not a security in terms of programmatic sales on exchanges.
In October 2023, the SEC moved to drop its case against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen, stating its intention to discuss remedies with the blockchain firm. Although Judge Torres initially scheduled the trial between Ripple and the SEC to commence in April, she later postponed the proceedings in October 2023 without setting a new trial date. The timing for the trial to resume remains uncertain as of the current publication date.