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The U.S. Securities and Exchange Commission (SEC) has firmly dismissed Ripple Labs’ recent request for a reduced penalty, asserting that it falls significantly short of what’s warranted.
On June 13, Ripple referenced the SEC’s settlement with Terraform Labs, appealing to 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” — a stark contrast to the SEC’s proposed $876.3 million civil penalty.
However, the very next day, the SEC responded in a June 14 letter to Torres, arguing that its $4.5 billion settlement with Terraform Labs and its co-founder Do Kwon — which included a $420 million civil penalty — was justified because the company is bankrupt, agreed to return funds to investors, and dismissed the leadership responsible for the violations.
“Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing,” the SEC noted.
Ripple’s claim that Terraform’s $420 million civil penalty was only about 1.27% of its “$33 billion gross sales” was not a fair comparison, according to the SEC.
The SEC clarified that it calculated Terraform’s penalty based on “the gross profit of the violative conduct,” which it estimated at over $3.5 billion, translating to an approximate 12% ratio.
Applying the same ratio to Ripple’s gross profits of $876.3 million, the civil penalty would be $102.6 million. However, the SEC argued, “That low of a penalty would not satisfy the purposes of the civil penalty statutes.”
The SEC is advocating for penalties against Ripple that total nearly $2 billion, encompassing $198.2 million in prejudgment interest, $876.3 million in civil penalties, and another $876.3 million in disgorgement.
The legal battle between Ripple and the SEC has been ongoing since 2020, when the SEC alleged that Ripple sold unregistered securities, a claim Judge Torres upheld in a July 2023 ruling, but only for sales to institutional investors.
In May, the SEC opposed Ripple’s attempt to seal certain financial details, insisting that the company should disclose the revenue generated from XRP sales, which Judge Torres had ruled were unregistered.