The Securities and Exchange Commission (SEC) has countered the proposal of Ripple Labs to lower the penalty against it to $10 million, saying “it would not satisfy the purposes of the civil penalty statutes.”
Ripple’s Attempt to Lower the Penalty
The SEC’s counter came on Friday, only a day after Ripple cited the recent settlement of the regulator with Terraform Labs and its former CEO, Do Kwon, to reduce a previously proposed civil penalty of $876.3 million to $10 million.
Ripple’s lawyers argued that the penalty proposed against the blockchain company by the regulator was “unreasonable” when compared to the civil penalty sought against Terraform Labs.
“As Ripple’s opposition explained, in comparable (and even more egregious) cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues,” Ripple argued. “Terraform fits that pattern.”
SEC’s Counter
In its counter, the regulator pointed out that Terraform is now bankrupt and also agreed to return money to investors. The company further fired the leaders “in charge at the time of the violations.”
“Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing,” the SEC stressed, adding that the cases of Ripple and Terraform Labs are not an “apples-to-apples comparison.”
The @SEC is raging. Ripple defended itself - “agreeing to nothing.” The court gave clarity that XRP is not a security. There are no “victims” to compensate. And worst of all for the @SEC, Ripple is thriving. But at least @SEC seems to have abandoned its absurd demand for $2B. https://t.co/KVSkB9OqlH
— Stuart Alderoty (@s_alderoty) June 15, 2024
The SEC sealed the settlement deal with Terraform Labs and Do Kwon last week for a hefty sum of more than $4.47 billion, which combines recovery and penalty. Kwon, whose extradition fate from Montenegro hangs in the balance, will have to pay over $204 million himself.
In its long-running case against Ripple, the agency is seeking $1.95 billion in total, out of which $876 million is for recovery, $198 million is for prejudgment interest, and $876 million is for a civil penalty.
In the latest court filing, the SEC pointed out that in the penalty against Terraform Labs, “the gross profit of the violative conduct” on over $3.5 billion was at nearly a 12 percent ratio. If the same ratio is applied to Ripple’s $876.3 million in gross profits, which has been asked to disgorge, the civil penalty would be $102.6 million.
“That low of a penalty would not satisfy the purposes of the civil penalty statutes,” the SEC added.
This article was written by Arnab Shome at www.financemagnates.com.
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