Lawyers for blockchain firm Ripple have asked a court to consider an “appropriate” civil penalty in its case against the United States Securities and Exchange Commission (SEC) following a settlement between the regulator and Terraform Labs.
In a June 13 filing in the U.S. District Court for the Southern District of New York, Ripple’s legal team submitted a notice of supplemental authority alleging the “unreasonableness” of the SEC’s civil penalty, citing a settlement in the Terraform case. Before Ripple’s filing, a federal judge approved a $4.5-billion deal between the SEC and Terraform Labs and its co-founder Do Kwon.
The SEC has requested that Ripple pay roughly $2 billion in disgorgement, prejudgement interest and civil penalties, while the blockchain firm has argued for no more than a $10-million penalty. Ripple lawyers made similar arguments in penalties imposed in the SEC’s respective cases against Block.one, Genesis Global Capital and Telegram, but the filing redacted information regarding the firm’s gross revenue.
“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,” said lawyers for Ripple. “Terraform fits that pattern. Here, by contrast, the SEC seeks a civil penalty far exceeding that range, even though there are no allegations of fraud in this case and Institutional Buyers did not suffer substantial losses. 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.”
One of crypto’s longest legal battles
After a two-week trial in April, a jury found Kwon and Terraform liable for fraud. In contrast, Ripple’s case with the SEC has been ongoing since December 2020, when the regulator alleged the blockchain company used XRP (XRP) as an unregistered security to raise funds. The case led to a significant legal precedent when, in July 2023, Judge Analisa Torres ruled the XRP token was not a security regarding programmatic sales on exchanges.
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The SEC moved to dismiss its case against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen in October 2023, saying at the time it planned to discuss remedies with the blockchain firm. Judge Torres had initially scheduled the trial between Ripple and the SEC to begin in April but, in October 2023, adjourned the proceeding with no appointed date for resumption. It’s unclear when the judge could set a date for the trial at the time of publication.
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