Ripple Cites SEC v. Terraform Case to Argue for Reduced Civil Penalty

The legal battle between Ripple and the SEC, which began in December 2020 over allegations that Ripple used XRP as an unregistered security, has taken a new turn.

In a filing on June 13 in the U.S. District Court for the Southern District of New York, Ripple’s legal team urged the court to consider a more “appropriate” civil penalty in light of a recent settlement between the SEC and Terraform Labs. Ripple’s lawyers pointed to a settlement in which a federal judge approved a $4.5 billion deal between the SEC and Terraform Labs, co-founded by Do Kwon, as a benchmark for fairness.

The SEC is demanding Ripple pay approximately $2 billion in disgorgement, prejudgment interest, and civil penalties. In contrast, Ripple argues that the penalty should be no more than $10 million. Ripple’s legal team has made similar arguments in the past, referencing penalties in the SEC’s cases against Block.one, Genesis Global Capital, and Telegram. However, the specific figures related to Ripple’s gross revenue were redacted in the filing.

“Ripple’s opposition highlights that in similar or even more severe cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues,” stated Ripple’s lawyers. “The Terraform case fits this pattern. By contrast, the SEC is seeking a civil penalty far exceeding this range in Ripple’s case, despite no allegations of fraud and no substantial losses by Institutional Buyers. The Terraform case supports our argument that the court should reject the SEC’s disproportionate and unprecedented request and impose a penalty of no more than $10 million.”

One of Crypto’s Longest Legal Battles

The legal battle between Ripple and the SEC has been ongoing since December 2020. The SEC accused Ripple of using XRP as an unregistered security to raise funds. A significant legal precedent was set in July 2023 when Judge Analisa Torres ruled that the XRP token was not a security regarding programmatic sales on exchanges.

In October 2023, the SEC moved to dismiss its case against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen, indicating plans to discuss remedies with Ripple. Initially, Judge Torres had scheduled the trial between Ripple and the SEC to start in April. However, in October 2023, she adjourned the proceedings without setting a new date. It remains unclear when the trial will resume.