Ripple Challenges SEC’s $2 Billion Claim, Proposes $10 Million Fine Limit


Tensions continue to mount in the ongoing legal tussle between Ripple, the digital payments protocol, and the Securities and Exchange Commission (SEC). The dispute revolves around an appropriate resolution for Ripple’s alleged transgressions of securities laws, and it appears that a clear end is not forthcoming.

At the heart of the controversial discourse is Ripple’s suggestion of a $10 million fine – a stark difference from the SEC’s proposed penalty. In opposition to the SEC’s request for a hefty fine and a final judgment, Ripple countered with a proposal that any penalty imposed by the court should not exceed $10 million.

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The staggering disconnection stems from the SEC’s claim that Ripple is liable for nearly $2 billion. The regulatory body suggested that Ripple be required to pay a civil penalty of around $876 million, along with a prejudgment interest of around $198 million and a disgorgement of $876 million. These figures represent Ripple’s alleged profits from violating the Securities Act.

Ripple, however, advocated for the court to reject the SEC’s demands for disgorgement and pre-judgment interest, arguing the focus should only be on the civil penalty which, in their opinion, should not surpass $10 million.

In defending their position, Ripple’s attorneys presented several reasoning points. They stressed that the statutory penalties proposed by the SEC were inapplicable to this case, claiming that the “SEC has never alleged fraud, deceit, or manipulation and has failed in its attempt to show that Ripple recklessly disregarded the law.” They argued that the SEC’s requested penalty of over $876 million penalties does not fit within the first-tier penalty structure for such a case. Ripple furthered their argument by suggesting that only the company’s pre-complaint institutional sales revenue should be evaluated when deciding upon a suitable remedy, hence their suggestion for a $10 million maximum penalty.

Ripple additionally challenged the SEC’s figures, accusing them of making an error while calculating Ripple’s earnings. The digital firm pointed out that the SEC omitted consideration for several of Ripple’s expense categories. They also stated that the SEC did not provide any justified evidence or explanations for why it ruled out any of Ripple’s deductible expenses.

This accusation was accompanied by a challenge to the SEC’s reliance on a declaration made by Andrea Fox – an accountant with the agency. Ripple’s lawyers contend that Fox was never formally disclosed as a fact or expert witness, and she did not testify during the discovery or supplemental remedies discovery phases. Consequently, the Ripple team moved to strike her declaration as an “untimely disclosed expert report.”

Adding another layer of complexity, the SEC proposed a permanent injunction restraining Ripple from conducting an unregistered offering of Institutional Sales. Understanding the potential negative effect it could have on their operations, Ripple fervently objected to the proposed injunction.

Ripple intelligibly articulated that the SEC has not sufficiently demonstrated why an injunction is necessary. Normally, such restrictions are enacted in scenarios where there is a considerable fear of repeated violations. But Ripple confidently maintained that the SEC failed to prove a “reasonable likelihood of future violations.”

Offering further assurance of compliance, Ripple’s legal counsel disclosed that the company has updated their contracts and sale strategies for XRP to evade potential infringements. Supporting Ripple’s claims, the company’s President, Monica Long, submitted a declaration detailing the steps Ripple has undertaken to prevent future violations.

As this intense legal battle ensues, Ripple’s cryptocurrency – XRP, has reportedly recovered above $0.54.