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Ripple Slapped with Proposed $2 Billion SEC Fine, Company Vows to “Expose” Regulator

Last Updated March 26, 2024 1:02 PM
Teuta Franjkovic
Last Updated March 26, 2024 1:02 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • The SEC is seeking a massive fine from Ripple Labs, including disgorgement, prejudgment interest, and a civil penalty.
  • Brad Garlinghouse criticizes the SEC’s fine as excessive and unprecedented.
  • Ripple plans to fight the SEC’s accusations and may use a previous ruling criticizing SEC’s tactics to support their case.

Ripple CEO Brad Garlinghouse and Chief Legal Officer Stuart Alderoty have disclosed  that the SEC is pursuing fines and penalties amounting to a colossal $2 billion.

According to recent court documents, the United States Securities and Exchange Commission (SEC) has asked  a New York judge to levy the fine against Ripple Labs.

SEC Seeks $1.95 Billion Fine from Ripple

Alderoty announced  that the SEC has proposed a significant fine against his company. He mentioned that redacted versions of the relevant court documents should be disclosed by March 26.

The SEC’s request includes an order for Ripple Labs to disgorge $876 million, pay $198 million in prejudgment interest. It also includes a civil penalty of $876 million, culminating in a total sum of $1.95 billion.

Garlinghouse criticized  the SEC for demanding substantial penalties without alleging any fraud or recklessness in its claims. He argued such a request was unprecedented and claimed Ripple’s response would reveal the SEC’s overreach.

In a separate tweet, Garlinghouse critiqued  the SEC, pointing to a previous ruling that criticized the agency for not adhering strictly to the law in its dealings with Ripple.

Ripple Co-founder Critiques SEC’s ‘Unhinged’ Stance

Chris Larsen, Ripple’s co-founder and executive chairman, made a pointed remark  about the current state of the SEC under Chair Gary Gensler, describing it as “unhinged”.

He criticized  the agency for acting as if it were above legal standards, suggesting this attitude has contributed to the United States falling behind other countries in certain respects.

He highlighted  the importance of acknowledging the regulator’s shortcomings, especially in an election year. This implies that he believed a Republican win could bring about significant changes at the SEC, including Gensler possibly being replaced.

The lawsuit began in December 2020, with the SEC accusing Ripple of breaching federal securities laws through the sale of XRP to institutional and retail clients.

In July of last year, Judge Analisa Torres of New York ruled that the sale of XRP via exchanges and algorithms was not in violation of US law. Instead, she found, it was Ripple’s sales of XRP to institutions that contravened regulations.

SEC Fine for Ripple May Not Be Based on Current XRP Price

Prior speculation hinted that Ripple might incur a fine of more than $2 billion, linked to its institutional XRP sales. This is because previous judgments found these transactions were securities sales.

On February 26, Ashley Prosper highlighted , in a legal document, the sale of 4.9 billion XRP to institutions. As a result, this sparked forecasts of potential fines reaching $2.6 billion, based on a token price of $0.55.

Nevertheless, by March 26, the price of XRP  had risen to $0.66.

It’s important to note that programmatic sales of XRP, including those made on exchanges, were not deemed as securities. Moreover, the SEC retracted claims that personal XRP sales by Garlinghouse and Larsen constituted securities transactions. Therefore, it is likely that these sales were not considered in calculating the SEC’s proposed fine.

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