Ripple Cites Terraform Labs Settlement to Urge Reduction of SEC Penalty in XRP Case

• Ripple is leveraging the recent Terraform Labs settlement to aim for a reduction in their own penalties imposed by the Securities and Exchange Commission (SEC).
• The settlement with Terraform Labs amounted to over $4.4 billion following accusations of fraudulently misleading investors, leading to a significant financial collapse.
• Ripple’s legal team highlights that the civil penalty portion of the settlement equates to about 1.27% of Terraform’s gross sales, positioning their plea as more reasonable by comparison.

Ripple appeals for reduced penalties in light of recent SEC settlement with Terraform Labs.

Ripple References SEC’s Terraform Labs Settlement in Legal Argument

This week saw Ripple drawing attention to the recent settlement between the SEC and Terraform Labs, a company found guilty of significant investor deception resulting in a massive financial downfall. The $4.47 billion settlement includes disgorgement, interest, and substantial civil penalties.

Ripple’s Strategic Legal Positioning

Ripple’s attorneys argue that the $420 million civil penalty imposed on Terraform, which constitutes about 1.27% of its gross sales, underscores the excessive nature of the penalty sought by the SEC in Ripple’s case. They suggest that the SEC’s historically agreed penalties range from 0.6% to 1.8% of gross revenues in similar cases, making the current demand unusually high.

Comparison with Terraform Labs Settlement

In analyzing the Terraform Labs case, Ripple’s defense claims the SEC’s penalty falls within an established range for comparable violations. They point out that Terraform Labs faced no fraud allegations, yet the penalties were scaled more reasonably compared to what Ripple is facing, despite similar circumstances.

Ripple’s Initial Legal Battles with SEC

The US District Judge Analisa Torres had previously ruled that Ripple’s public sales of XRP did not constitute securities offerings, a substantial win for the company. However, the judge favored the SEC’s view concerning Ripple’s sales directly to institutional investors. This mixed ruling has prompted Ripple to seek reconsideration of the penalties.

Implications for Ripple’s Financial Penalties

The SEC has demanded nearly $2 billion from Ripple, including disgorgement, prejudgment interest, and civil penalties. Ripple’s legal argument is that an appropriate penalty should reflect a much smaller percentage of their gross revenues from institutional sales, suggesting $10 million would be reasonable.

Conclusion

Ripple’s case exemplifies the ongoing legal complexities within the cryptocurrency sector, particularly concerning regulatory oversight and enforcement. By evaluating previous settlements like that of Terraform Labs, Ripple aspires to achieve a more balanced penalty, setting a precedent for how similar cases might be handled in the future.