The Securities and Exchange Commission (SEC) is pressing for a near $2 billion fine against Ripple Labs, urging a New York court to assess the “severity” of the company’s alleged misconduct.
In a court filing on Monday, the SEC requested Judge Analisa Torres to impose a fine that combines $876 million in disgorgement, $198 million in prejudgment interest, and an additional $876 million in civil penalties.
The regulatory body emphasized the necessity of a strong deterrent to caution Ripple and other entities offering unregistered public sales of crypto assets. This move comes after years of legal battles following the SEC’s claims that Ripple raised $1.3 billion through unregistered sales of XRP, a cryptocurrency the agency argues is a security.
While some of Ripple’s XRP sales were deemed non-violative of securities laws by Judge Torres due to a specific blind bid process, the judge found other direct sales to institutional investors to be securities.
Ripple has responded to the SEC’s proposed judgment, criticizing the regulator’s approach and promising a formal reply by April 22.
In February, the court approved the SEC’s request to compel Ripple to provide further information, which is crucial for determining suitable penalties in this case. Ripple is now required to hand over financial statements from 2022 to 2023, along with contracts related to ‘Institutional Sales’ post the filing of the complaint. Additionally, the company must respond to inquiries regarding the proceeds it received from these institutional sales of XRP.
Ripple had previously argued that the company’s financial health was not relevant to the case. However, the court disagreed, stating that denying access to this information would be unjustified, especially as it could be crucial in the remedy stage of the lawsuit.
The judge also supported the SEC’s stance that obtaining these documents is crucial to decide the appropriate legal remedies, which may include injunctions and civil penalties, if Ripple is found liable for violating Section 5 of the Securities Act of 1933.
The lawsuit against Ripple alleges that the company, along with its CEO Brad Garlinghouse and executive chair Chris Larsen, engaged in raising funds through unregistered securities. In October 2023, the SEC said it plans to drop the case against Garlinghouse and Larsen, but will continue legal proceedings against Ripple.
The trial between Ripple and the SEC is set to start in April. This lawsuit is part of a broader enforcement campaign by the SEC against major U.S. cryptocurrency exchanges, including Coinbase and Binance. Ripple’s chief legal officer, Stuart Alderoty, has criticized the SEC’s aggressive stance towards the crypto industry, labeling the regulator as “out of control.”
