Key Insights:
- Ripple Labs proposes a $10 million penalty, rejecting the SEC’s demand for over $876 million in various fines.
- Ripple asserts changes in business practices and compliance with licensing to mitigate future legal risks.
- The SEC’s request for substantial disgorgement and penalties faces opposition from Ripple, citing a lack of recklessness or fraud.
In a recent court filing, Ripple Labs opposed the United States Securities and Exchange Commission’s (SEC) hefty penalty demands. The blockchain company disputes the SEC’s call for $876,308,712 in disgorgement and an additional $198,150,940 in prejudgment interest. Instead, Ripple argues that a reasonable civil penalty should be capped at $10 million.
#XRPCommunity #SECGov v. #Ripple #XRP@Ripple has filed its Opposition to the @SECGov‘s Motion for Remedies and Entry of Final Judgment.https://t.co/Q0OOay1jdt
— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) April 23, 2024
The dispute centers on the SEC’s allegations that Ripple violated Section 5 of the Securities Act of 1933 through its XRP offerings under institutional investment contracts. The company’s legal team contends that the SEC has not proven that the company is likely to commit future violations or that it has shown a reckless disregard for the law in its institutional sales.
Moreover, Ripple highlights a recent legal precedent in the Govil case, which it argues should preclude the SEC from seeking disgorgement. According to Ripple, the SEC cannot demonstrate the pecuniary harm necessary to justify such financial recovery, and company’s legitimate business expenses should offset any disgorgement.
Additionally, the company has informed the court of significant changes in how it conducts its XRP sales. The company has secured the necessary licenses to operate outside the U.S. and has modified its contracts to align with the court’s previous directives, aiming to prevent future legal challenges.
Ripple’s Chief Legal Officer, Stuart Alderoty, criticized the SEC’s approach, stating,
“Our opposition to the SEC’s request for $2 billion 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 intimidation against all of the crypto in the U.S.”
Feels apropos that we file our response on the same day that 2 SEC lawyers “resign” for their (mis)conduct in the Debt Box case…
The US will be picking up the pieces of the agency’s disastrous policies long after Gensler is gone. https://t.co/vQMHKG5kbW
— Brad Garlinghouse (@bgarlinghouse) April 23, 2024
As the case nears its conclusion, with the SEC set to file its reply brief by May 6, the company remains firm in its stance against the regulator’s demands. The company asserts that the SEC’s case is an example of administrative overreach based merely on speculative concerns about future law violations.
The crypto industry is closely watching the ongoing legal battle between Ripple and the SEC, as it could set significant precedents for how digital assets are regulated in the United States. The company’s current filings include supporting declarations and exhibits that showcase the company’s efforts to comply with existing regulations and adapt its business practices accordingly.
The final ruling by Judge Torres in this case will be key. It will affect the company’s operations and could influence the broader regulatory landscape for cryptocurrencies in the U.S.