The latest argument from Ripple Labs for a reduced penalty has been met with criticism from the United States Securities and Exchange Commission (SEC), who deemed it insufficient. Ripple had referenced the SEC’s settlement with Terraform Labs on June 13 when requesting Judge Analisa Torres of the United States District Court for the Southern District of New York for a penalty of “no more than $10 million,” a significant decrease from the SEC’s proposed $876.3 million civil penalty.
In response, the SEC argued on June 14 in a letter to Torres that their $4.5 billion settlement with Terraform Labs and co-founder Do Kwon, which included a $420 million civil penalty, was justified as the firm was bankrupt, committed to returning funds to investors, and removed leaders responsible for the violations. The SEC refuted Ripple’s comparison of Terraform’s penalty to its gross sales, stating that it was not an accurate comparison.
The SEC defended its measurement of Terraform’s penalty against the gross profit of the violative conduct, which they estimated at over $3.5 billion, resulting in a nearly 12% ratio. Applying the same ratio to Ripple’s $876.3 million gross profits subject to disgorgement would result in a civil penalty of $102.6 million, a figure the SEC deemed inadequate.
The SEC’s proposed penalties for Ripple amount to almost $2 billion, including prejudgment interest, civil penalty, and disgorgement. The legal battle between Ripple and the SEC began in 2020 when the SEC alleged that Ripple sold unregistered securities, a claim that Torres validated in a ruling in July 2023, but only in relation to sales to institutional investors. In a recent development, the SEC objected to Ripple’s attempt to seal certain financial information, insisting that the firm disclose revenue generated from unregistered XRP sales.
In the ongoing legal dispute between the SEC and Ripple, the SEC faces strong opposition from the crypto industry’s legal experts, reminiscent of a battle between Godzilla and Kong.