In the ongoing high-profile case between Ripple and the US Securities and Exchange Commission (SEC), the blockchain payments company has filed a key notice of supplemental authority to the Southern District of New York.
Lawyers for the company seek to leverage financial penalties recently imposed on Terraform Labs and its founder, Do Kwon, in an appeal to pay lower fines in their own legal battle.
Meanwhile, Ripple boss Brad Garlinghouse has hinted that a resolution could be as close as September.
A Push To Cut Fines From $2 Billion To $10 Million
Ripple’s legal team argued for more equitable treatment in their lawsuit with the Securities and Exchange Commission.
BREAKING: @Ripple files Notice of Supplemental Authority regarding TerraForm Labs Consent Judgment! The SEC v. RIPPLE case could end ANYTIME! #XRP pic.twitter.com/4n5RF5SiHY
— JackTheRippler © (@RippleXrpie) June 13, 2024
In the June 13 notice of supplemental authority, Ripple specifically mentions the SEC vs. Terraform Labs, where the company and its former CEO Do Kwon were found liable for running “one of the largest securities frauds in US history,” as described by the regulator.
Ripple’s attorneys compare the SEC’s actions in the Terraform case with its strategy towards the San Francisco-based blockchain company, noting that unlike Terraform, which conducted vast fraudulent activities leading to $40 billion in customer losses, Ripple’s case does not entail any fraud allegations.
A U.S. district judge has rubber-stamped the settlement between Terraform, Kwon, and the SEC — meaning the defendants will pay nearly $3.6 billion in disgorgement, a $420 million civil penalty, and around $467 million in prejudgement interest for a total settlement of nearly $4.5 billion.
“This civil penalty represents approximately 1.27% of defendants’ $33 billion gross sales,” Ripple wrote in its notice. Noting later that in other suits “the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues.”
But in the Ripple suit, 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,” the legal team posited in their filing. Notably, in March, the SEC proposed that Ripple, the company behind the XRP cryptocurrency, fork out $2 billion in fines and penalties.
Ripple says the Terraform settlement is evidence 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”.
A Long-Standing Legal Dispute
The lawsuit against Ripple has been ongoing since late 2020, when the SEC sued the fintech startup, chairman Christian Larsen, and CEO Brad Garlinghouse alleging that they raised $1.3 billion through the sale of XRP, which the regulator believed was an unregistered security.
In July 2023, Judge Analisa Torres declared that Ripple’s programmatic sales of XRP to retail investors did not qualify as securities. She did, however, rule that institutional sales of the token violated securities laws.
When the suit was lodged, XRP was ranked the third-biggest cryptocurrency behind only Bitcoin and Ethereum, with a market value of around $20.5 billion. The token’s market capitalization has ballooned to $27 billion since then. However, XRP has been knocked out of the top three by other cryptos. It’s now the eighth most valuable cryptocurrency, with Tether, BNB, Solana, Lido Staked Ether, and USDC coming between it and the two crypto majors.
XRP is trading for $0.4779 as of this writing, showing 4% losses over the past day, according to CoinGecko.
In the meantime, Ripple’s Garlinghouse forecasts that the protracted case could be concluded by the end of this summer (September 21).
