#Ripple #SEC #TerraformLabs #Cryptocurrency #LegalBattle #SecuritiesLaw #CryptoRegulation #Fines
The US Securities and Exchange Commission (SEC) recently made a strong rebuttal against Ripple’s attempt to leverage the Terraform Labs settlement as a point of reference in its ongoing legal conflict over a proposed $2 billion fine. Ripple’s defense against the SEC’s hefty fine suggestion was to draw parallels with the comparatively mild penalty imposed on Terraform Labs, which faced charges for fraudulent activities resulting in massive investor losses, yet was penalized only 1.27% of its gross sales. This move by Ripple aimed to highlight the disproportionality of the SEC’s fine demand.
However, the SEC has criticized Ripple’s arguments for several reasons, stating that the comparison is flawed both in context and calculation. Ripple’s case differs markedly from Terraform’s, not least because Terraform has declared bankruptcy and has consented to extensive punitive measures, including the dismantling of its operations and the significant restitution to investors. This contrasts sharply with Ripple, which has not conceded to any of the suggested rectifications, such as ceasing operations or compensating investors. The SEC asserts that Terraform’s willingness to voluntarily address and correct its violations directly affected the penalty’s severity, a pathway Ripple has yet to choose.
The SEC further dismantles Ripple’s financial comparisons, pointing out that its calculation does not account for gross profit, an aspect critical to determining the appropriateness of the penalty. By correctly applying the gross profit factor, the SEC argues that the suitable fine for Ripple should be substantially higher than Ripple’s proposed ceiling, factoring the company’s significant financial gains from the alleged violations. Ripple’s ongoing legal entanglement with the SEC dates back to 2020, revolving around the contention that Ripple used XRP, its associated cryptocurrency, as an unregistered security. This case is pivotal, given the precedent it sets for cryptocurrency regulation and securities law, challenging traditional definitions and potentially shaping the future landscape of digital asset legislation and compliance.
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