Ripple Labs has formally opposed the hefty financial penalties proposed by the U.S. Securities and Exchange Commission (SEC), countering the federal agency's request for over $1 billion in disgorgement and penalties with a proposed settlement of just $10 million. This legal stance comes as the high-profile case between Ripple and the SEC, which centers on the alleged unlawful sale of XRP tokens, appears to be drawing to a close.
Disagreement on Penalties and Future Compliance
In recent court filings dated April 22, Ripple refuted several of the SEC’s claims and penalties related to its sale of XRP under what the SEC deemed unregistered securities offerings. The SEC had initially requested $876,308,712 in disgorgement and an additional $198,150,940 in prejudgment interest, alongside a similar amount as a civil penalty. In contrast, Ripple has consented to a maximum civil penalty of $10 million, arguing that the SEC's demands were disproportionately high and not reflective of the company’s current compliance efforts.
Ripple presented key arguments in its defense:
Future Violations Unlikely: Ripple argued that the SEC has not demonstrated a significant likelihood of future violations, questioning the need for an injunction.
Disgorgement Not Justified: The company contended that the SEC failed to prove direct financial harm that would justify disgorgement, suggesting that any such calculations should subtract legitimate business expenses.
Excessive Penalties: Ripple maintained that the penalties should not exceed $10 million, citing the SEC's historically lower fines in similar digital asset cases.
Ripple’s Adjustments and Compliance Efforts
Following the court’s directives, Ripple has adjusted its sales strategies for XRP, acquired necessary licenses for international operations, and revised its contracts to align with U.S. securities laws. These changes were highlighted in Ripple’s filings as part of its efforts to demonstrate compliance and argue against the SEC’s claim for ongoing oversight based on speculative future violations.
Upcoming Legal Proceedings
The SEC is scheduled to submit its reply brief under seal by May 6, with subsequent deadlines through May 20 for all parties, including third parties, to file motions related to sealing specific details of the court filings.
Ripple’s Legal Outlook
Stuart Alderoty, Chief Legal Officer at Ripple, criticized the SEC’s approach, describing it as overly aggressive and indicative of an intent to intimidate the broader cryptocurrency industry in the United States. Alderoty expressed confidence that Judge Torres, overseeing the case, would recognize the lack of recklessness or fraud in Ripple’s actions and rule fairly on the final remedies.
As the case nears its conclusion, the cryptocurrency community closely watches, aware that the outcome could have significant implications for the regulation of digital assets in the U.S.
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