Ripple Fights SEC’s $2 Billion Fine, Using Recent Terraform Labs Ruling
The fintech company argues for more consistent regulatory penalties in and a fairer fine in its case against the SEC, citing the recent ruling against Terraform Labs.
Ripple Labs is vigorously contesting a $2 billion fine requested by the US Securities and Exchange Commission (SEC), branding the penalty as excessively high. In a strategic move, Ripple’s legal team filed a notice of supplemental authority with the Southern District of New York on June 13, 2024, to highlight disparities in the SEC’s treatment of similar cases.
Central to Ripple’s argument is a recent SEC case against Terraform Labs and its CEO, Do Hyeong Kwon, who were found liable for extensive securities fraud. With these serious allegations, Terraform was ordered to pay approximately $3.59 billion in disgorgement and a $420 million civil penalty, amounting to about 1.27% of their $33 billion gross sales.
Ripple’s legal team, led by Michael K. Kellogg, contrasts this with the SEC’s demands in their case. They argue that the $2 billion fine proposed by the SEC against Ripple is disproportionately high, especially given that there are no allegations of fraud in Ripple’s case. Their analysis indicates that penalties in similar cases typically range from 0.6% to 1.8% of the defendant’s gross revenues.
The notice submitted by Ripple’s counsel underscores the SEC’s inconsistent application of penalties, suggesting that the SEC’s approach towards Ripple reflects regulatory overreach. The legal team asserts that the penalty sought by the SEC far exceeds the norms established in comparable situations.
Ripple’s lawyers have proposed a more reasonable penalty cap at $10 million, which is significantly lower than the SEC’s current figure. This figure is based on a detailed comparative analysis with other cases, including the Terraform Labs case, where the fraudulent activities led to substantial investor losses.
Legal experts have weighed in on Ripple’s position. Bill Morgan, a prominent legal analyst, criticized the SEC’s stance, pointing out that it appears “ill-motivated” and disproportionately harsh towards Ripple. The legal battle between Ripple and the SEC not only highlights specific issues within this case but also raises broader concerns about the consistency and fairness of regulatory actions in the crypto industry.
Ripple’s latest legal maneuver aims to illustrate what it perceives as an unfair and inconsistent penalty by drawing parallels with the Terraform case. This tactic seeks to establish a basis for negotiating a more reasonable fine, aligning Ripple’s penalty with precedents set in similar cases.
As the legal proceedings continue, Ripple’s battle with the SEC remains a pivotal moment in the ongoing discourse about regulatory fairness in the cryptocurrency market. The outcome could set a significant precedent for how regulatory bodies approach and penalize entities within the rapidly evolving crypto space.
