Crypto firm Ripple has referenced the recent settlement between the US Securities and Exchange Commission (SEC) and Terraform Labs to challenge the financial regulator’s proposed $2 billion penalty.
On June 13, Ripple filed a notice of supplemental authority with Judge Analisa Torres of the Southern District of New York, arguing that the SEC’s demands against it were unreasonable and unfair.
According to the firm, bankrupt Terraform Labs and its CEO Do Kwon were found liable for executing one of the largest securities frauds in US history and were only required to pay a 1.27% civil penalty for their $33 billion gross sales. On June 12, Terraform agreed to pay $4.47 billion in fines—$3.5 billion in disgorgement and $420 million for civil penalties—to settle its case against the SEC.
Ripple stated that Terraform’s penalty was in congruence with the regulator’s practice of agreeing to “civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues.”
However, Ripple pointed out that the regulator’s demands were far greater in its case despite the absence of any “allegations of fraud,” adding that “institutional buyers did not suffer substantial losses.”
As a result, Ripple requested the court to reject the SEC’s proposed penalty and impose a civil penalty not exceeding $10 million. It stated:
“Terraform thus confirms that the Court should reject the SEC’s disproportionate and unprecedented request and that an appropriate civil penalty would be no more than $10 million.”
Over the past years, the SEC and Ripple have been embroiled in a legal battle. The regulator accuses the crypto firm of raising more than $1 billion by selling unregistered security tokens.
Last year, Judge Torres delivered a mixed ruling. She declared that Ripple’s programmatic sales of XRP did not violate securities laws. However, she also ruled that the direct sales of XRP to institutional investors were considered securities.
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