Ripple Opposes SEC’s $2B Fine, Argues for $10M Penalty

In a rebuttal filed late Monday, XRP’s parent firm, Ripple Labs, responded to an earlier filing by the US Securities and Exchange Commission (SEC). The crypto foundation argued that the $2 billion fine proposed by the regulator was preposterous and a show of its “ongoing intimidation.”

Ripple’s Lab asked the court to reject the SEC’s request that the foundation pay disgorgement and pre-judgment levies and only subject it to a fine lower or around $10 million.

“The Court should deny the SEC’s requests for an injunction, for disgorgement, and for pre-judgment interest, and should impose a civil penalty of no more than $10 million,” the filing stated.

Ripple’s CLO, Stuart Alderoty, further confirmed the response in a tweet on Monday, branding the SEC’s request an overreach of regulatory power. He, however, expressed optimism that the legal authorities would rule on the case fairly.

Our opposition to the SEC’s request for $2B in penalties for legacy institutional sales is now public. In a case that had no allegations (or findings) of recklessness or fraud, and in which Ripple won on significant issues, the SEC’s ask is just more evidence of its ongoing… https://t.co/GLcdsyInZW

— Stuart Alderoty (@s_alderoty) April 23, 2024

The response follows the SEC’s previous filing last month that Ripple should be fined approximately $2 billion for selling its cryptocurrency, XRP, to institutional investors. According to the Wall Street regulator’s filing, Ripple Labs should pay $876 million in disgorgement, $198 million in prejudgement interest, and $876 million in civil penalty, bringing the total to almost $2 billion.

The Legal Battle Continues

The Securities and Exchange Commission (SEC) has been in a legal dispute with Ripple for several years, alleging that Ripple raised $1.3 billion through the sale of XRP, which the SEC claims is an unregistered security. Last year, Judge Analisa Torres ruled that while some of Ripple’s sales of XRP, known as programmatic sales, did not violate securities laws due to the presence of a blind bid process, other direct sales of XRP to institutional investors were considered securities.

The SEC contends that Ripple has conducted significant institutional sales of XRP, amounting to billions of dollars. In its recent court filing, the SEC argued that Ripple still holds a considerable amount of XRP and continues to sell it to institutional purchasers without registering these transactions. This ongoing legal battle revolves around whether XRP should be classified as a security and whether Ripple’s sales of XRP violated securities laws.

The Securities and Exchange Commission (SEC) proposed that Ripple Labs should pay a total of $1.95 billion in penalties to end the dispute. This proposal comes after the court found Ripple guilty of violating federal securities laws due to its institutional sales of XRP. However, the court dismissed the SEC’s allegations that other forms of XRP sales, such as those occurring on exchanges and through algorithms, also violated securities laws.

Ripple’s Legal Team Accuses SEC of Regulatory Overreach in Ongoing Battle

Ripple’s legal team contends that the SEC’s remedial requests demonstrate excessive regulatory overreach in this case. The team’s lawyer also wrote, “The agency acts as though it had prevailed entirely and had proved reckless conduct. It has done neither.”

Moreover, Ripple’s lawyers assert that the SEC is seeking disgorgement, which is prohibited by established Supreme Court and Circuit precedent, along with a penalty that far surpasses what has been obtained from any other defendant or respondent in a digital-asset case. Additionally, in a paragraph where Ripple’s financial details, including revenue from institutional sales, income taxes paid, and losses incurred, were redacted, the entity asserts that it has no gains to disgorge.