SEC Dropped $2B Penalty but Still Wants $102.6M from Ripple, Asking the Court to ‘Disgorge Results’
Ripple’s CLO argues that it shouldn’t be treated the same as Terraform Labs, especially since there were no victims.
- The SEC cut its demand from $2 billion to $102.6 million; Ripple says no investors were harmed.
- The case debates XRP’s classification (security or not), with Ripple arguing against harsh penalties.
- Judge Torres ruled that Ripple sold unregistered securities to institutions. Ripple says $10 million is enough, but the SEC will not accept it.
The SEC has withdrawn its initial demand for Ripple to pay $2 billion but contends that the proposed $10 million penalty is insufficient. The agency now seeks $102.6 million but the company’s CLO argues that there were no “victims” to compensate.
The lawsuit against Ripple began with allegations of selling unregistered securities through the sale of XRP. Now, the SEC argues that Ripple is not making any meaningful concessions, maintaining that it should not pay more than $10 million.
Despite Ripple contending that no investors were harmed thus $10 million should be enough, unlike in the Terraform Labs case, the SEC is urging the court to “disgorge results,” saying penalties below its $102.6 million ask won’t “satisfy the purpose of the civil penalty statutes.”
Is XRP a Security?
The central issue in the court case is whether XRP should be classified as a security or a commodity. According to a Bitcoin News article, Alderoty mentioned that the court clarified that XRP is not a security under certain conditions.
An article by Cointelegraph further explains that Judge Torres ruled that the SEC’s claims were valid, determining that Ripple sold unregistered securities only to institutional investors.
Ripple’s XRP, operating on a decentralized public blockchain and adhering to the guidelines provided by FIT21, could be considered a commodity and, if so, should fall under the jurisdiction of the CFTC.
Ripple’s Arguments Opposing the Initial $2 Billion
The SEC is arguing that Ripple is trying to use the 1.27% ratio comparison of Terraform’s penalty to its “gross sales” but doesn’t want to use the settlement to gross profit of the violated conduct, which is near 12%. It noted that should the same standard be applied, Ripple would have to pay $102.6 million.
While Ripple argues that no investors were harmed, the SEC seeks the high penalty, asking the court to “disgorge results,” aiming to reclaim profits obtained through allegedly illegal or unethical means.
