Ripple Labs has formally requested a reduction in the $2 billion penalty proposed by the U.S. Securities and Exchange Commission (SEC). 

The company, which has been engaged in a lengthy legal battle with the SEC, contends that the suggested fines are disproportionate. In a “notice of supplemental authority” issued on Thursday, Ripple argues that its fine should be closer to $10 million, drawing comparisons to recent fines imposed on Terraform Labs.

Comparison with Terraform Labs Settlement

Ripple’s legal team is leveraging the recent settlement between the SEC and Terraform Labs to support their case. On Wednesday, Terraform agreed to pay $4.47 billion in fines, a settlement subsequently approved by a judge. Ripple’s notice emphasizes the discrepancy between its proposed $2 billion penalty and the fines imposed on Terraform, which they argue involve more severe allegations.

Ripple’s lawyers stated, 

“The civil penalty sought by the SEC in Terraform demonstrates the unreasonableness of the civil penalty sought by the SEC in this case.” 

Moreover, they highlighted that in similar or more severe cases, the SEC has imposed penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues, suggesting that Terraform’s settlement is aligned with this pattern.

Absence of Fraud Allegations

Ripple’s defense also differentiates its case from that of Terraform by pointing out the absence of fraud allegations. The SEC’s case against Terraform included a jury’s determination in April that Terraform Labs and its cofounder, Do Kwon, engaged in civil fraud. Ripple emphasizes that no such allegations exist in its case and that institutional buyers of XRP did not suffer substantial losses.

“Here, by contrast, the SEC seeks a civil penalty far exceeding that range, even though there are no allegations of fraud in this case and Institutional Buyers did not suffer substantial losses,” Ripple’s lawyers asserted. 

This comparison is a critical element of Ripple’s argument for a reduced penalty, positioning the company’s circumstances as less severe than those involving Terraform.

The SEC and Ripple have been entangled in legal proceedings for several years. The SEC accused Ripple of raising $1.3 billion through the sale of XRP, which it claims is an unregistered security. Last year, Judge Analisa Torres of New York ruled that some of Ripple’s sales, termed programmatic, of XRP did not violate securities laws due to a blind bid process. However, she also determined that other direct sales of the token to institutional investors did qualify as securities.

Despite being in its trial stage, the legal battle may drag on for years due to the complexity of the process and possible delays and appeals from both parties. According to Ripple’s CEO Brad Garlinghouse, the resolution may occur as soon as this summer. 

“My estimation is sometime before the end of the summer. Somebody asked me about the end of August, but I pointed out that September 21 is the end of the summer,” he recently said.

Possible Resolutions and Market Reactions

Another person who believes the case may officially end in the next few months is American lawyer Jeremy Hogan. 

He envisioned a $100 million settlement,

“I’m saying that the Judge will order 0 disgorgement but throws the SEC a bone and orders Ripple to pay a $100 million penalty.”

Some might view the SEC as the underdog in the lawsuit, considering the company’s three partial court wins secured throughout 2023. XRP’s price reacted positively after each triumph, meaning a decisive victory may once again cause a substantial rally.

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