#Ripple #XRP #SEC #TerraformLabs #Blockchain #Cryptocurrency #SecuritiesLaw #LegalBattle
Ripple Labs is currently in the headlines for leveraging a recent legal outcome involving Terraform Labs and the Securities and Exchange Commission (SEC) to advocate for a significant reduction in its own penalty related to an ongoing SEC lawsuit. Ripple is pushing for the nearly $2 billion penalty proposed by the SEC for allegedly offering XRP tokens to institutions as unregistered securities, to be reduced to $10 million. This move was highlighted in a “notice of supplemental authority” filed by Ripple, drawing a parallel between its case and the settlement terms agreed upon between the SEC and Terraform Labs.
The argument for a lower fine hinges on a comparison with penalties in cases deemed by Ripple to be comparable or more serious, where the SEC agreed to significantly lower penalties as a percentage of the defendants’ gross revenues. Terraform’s settlement with the SEC, which resulted in a hefty sum of over $4.47 billion in combined recovery and penalty—with its former CEO Do Kwon personally liable for over $204 million—serves as a benchmark for Ripple. Despite the magnitude of Terraform’s case, which involved charges of civil fraud, Ripple’s legal team argues that their case, which lacks allegations of fraud and where institutional buyers did not incur substantial losses, does not warrant such a high penalty.
Ripple’s battle with the SEC has been lengthy and fraught with developments. Initially filed in December 2020, the lawsuit alleged Ripple conducted illegal sales of the XRP token, collecting more than $1.3 billion from retail and institutional investors. While the case initially targeted high-profile Ripple executives, charges against them were eventually dropped. Furthermore, a significant legal victory for Ripple came last July when a New York federal court ruled that XRP’s sale on exchanges and via algorithms was not in violation of U.S. securities laws, although it found sales to institutions problematic. Despite this, in March, the SEC proposed a staggering $1.95 billion in recovery and civil penalties, a figure that Ripple vehemently contests. The outcome of this legal tangle will likely have far-reaching implications for the blockchain and cryptocurrency sector, particularly regarding how digital assets are regulated and classified under U.S. securities law.
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