Cryptocurrency companies are under scrutiny by the US Securities and Exchange Commission (SEC), with Ripple criticizing the proposed $2 billion fine imposed on them. Ripple argues that the penalty is disproportionate when compared to the recent settlement between the SEC and Terraform Labs.
Terraform Labs, a bankrupt company and its CEO Do Kwon, were found liable for executing a large securities fraud and were only required to pay a 1.27% civil penalty for their $33 billion gross sales. In contrast, Ripple is facing a much larger penalty despite the absence of allegations of fraud and no substantial losses suffered by institutional buyers.
Ripple has filed a notice of supplemental authority with Judge Analisa Torres, challenging the SEC’s demands as unreasonable and unfair. They point out that the SEC’s practice typically involves civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues, making Terraform’s penalty more in line with industry standards.
In light of this comparison, Ripple is urging the court to reject the SEC’s proposed penalty and impose a civil penalty not exceeding $10 million. They believe that Terraform’s case demonstrates that the SEC’s request is disproportionate and unprecedented, and they are seeking a fair resolution to the legal battle between the two parties.
The SEC has accused Ripple of raising over $1 billion through the sale of unregistered security tokens, leading to a legal dispute that has been ongoing for years. While Judge Torres ruled last year that Ripple’s programmatic sales of XRP did not violate securities laws, she also determined that direct sales of XRP to institutional investors were considered securities.
This latest development in the legal battle between Ripple and the SEC highlights the complexities and challenges faced by cryptocurrency companies in navigating regulatory frameworks. As the industry continues to evolve, it remains to be seen how these issues will be resolved and what impact they will have on the wider crypto market.