SEC shoots down Ripple’s argument for a lower penalty

The SEC claimed Ripple’s request for a maximum $10 million fine would not be enough, and any comparison to its Terraform Labs settlement would not hold up.
The SEC claimed Ripple’s request for a maximum $10 million fine would not be enough, and any comparison to its Terraform Labs settlement would not hold up.

The United States Securities and Exchange Commission (SEC) has criticized Ripple Labs’ latest argument for a lower penalty, saying it wouldn’t be enough.

On June 13, Ripple cited the SEC’s settlement with Terraform Labs when it again asked 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” — far lower than the regulator’s proposed $876.3 million civil penalty.

A day later, the SEC argued in a June 14 letter to Torres that its $4.5 billion settlement with Terraform Labs and its co-founder Do Kwon — inclusive of a $420 million civil penalty — was made as the firm is bankrupt, agreed to return money to investors and fired leaders “in charge at the time of the violations.”

“Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing.”

Ripple’s argument that Terraform’s $420 million civil penalty was around 1.27% of its “$33 billion gross sales” wasn’t an “apples-to-apples comparison,” the SEC said.

Highlighted excerpt from the SEC’s letter. Source: Pacer

The SEC added it measured Terraform’s penalty against “the gross profit of the violative conduct,” which it pinned at over $3.5 billion — a nearly 12% ratio.

The regulator argued Ripple’s civil penalty would be $102.6 million if the same ratio were applied to the $876.3 million of Ripple’s gross profits it asked to disgorge.

“That low of a penalty would not satisfy the purposes of the civil penalty statutes,” the SEC said.

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The SEC’s proposed penalties for Ripple total nearly $2 billion, which includes $198.2 million in prejudgment interest, $876.3 million in civil penalty and another $876.3 million in disgorgement.

The pair have been in their court fight since 2020 when the SEC claimed Ripple sold unregistered securities, which Torres agreed it did in a July 2023 ruling — but only when sold to institutional investors.

In May, the SEC objected to Ripple’s bid to seal some of its finances, with the regulator arguing the firm should disclose the revenue it made from XRP (XRP) sales that Torres ruled were unregistered.

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