Ripple rejects SEC’s $2 billion fine for ‘unreasonableness’ citing Terraform settlement
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A recent filing in the US District court for the Southern District of New York shows that Ripple’s legal team has submitted a notice of supplemental authority, alleging the “unreasonableness” of the SEC’s requested civil penalty.
The filing was made on June 13, the same day that Terraform Labs settled a lawsuit with the SEC for $4.47 billion. Ripple’s lawyers have asked the court to consider an “appropriate” civil penalty, given the precedent shown in the Terraform Labs settlement. Ripple’s defense attorney James Filan shared a PDF copy of the filing on X.
The SEC had requested that Ripple pay roughly $2 billion in disgorgement, prejudgement interest, and civil penalties. In response, the blockchain firm has argued for a penalty cap of no more than $10 million. Ripple’s lawyers have made similar arguments regarding penalties imposed in the SEC’s respective cases against Block.one, Telegram, and Genesis Global Capital. Notably, this line of argument falls to suspicion because Ripple’s filing redacted critical information which should provide context for judgment based on the firm’s revenue numbers.
“As Ripple’s opposition explained, in comparable (and even in more egregious) 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 in the filing.
Ripple’s legal representatives also argue that Terraform “fits the pattern” and that, by contrast, the SEC is seeking a civil penalty that exceeds the range based on Terraform’s settlement, despite the lack of allegations of fraud on its part.
“Terraform thus confirms that the Court should reject the SEC’s disproportionate and unprecedented request and that an appropriate civil penalty would be no more than $10 million,” the lawyers said.
The SEC’s case against Ripple began in December 2020, when the regulator alleged that the blockchain firm used its XRP token as an unregistered security to raise funds. The case has become one of the crypto industry’s longest-running legal battles, leading to a significant legal precedent in July 2023 when Judge Analisa Torres ruled that the XRP token was not a security regarding programmatic sales on exchanges.
In October 2023, the SEC moved to dismiss its case against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen, stating that it planned to discuss remedies with the blockchain firm. Judge Torres later rejected the SEC’s motion.
Although Judge Torres had initially scheduled the trial between Ripple and the SEC to begin in April, she adjourned the proceeding in October 2023 with no appointed date for resumption. As of the time of publication, it remains unclear when the judge could set a new date for the trial.
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Author: Vince Dioquino
