US SEC pushes back against Ripple's efforts to lower its fines saying the firm 'is agreeing to nothing'

The U.S. Securities and Exchange Commission rebutted Ripple's push for lower fines in its case against the regulator and said circumstances were different when it set penalties for Terraform last week. 

Ripple, which has been in a legal battle with the SEC since 2020, compared the regulator's proposed $2 billion fine for selling XRP to institutional investors to fines against Terraform Labs in a "notice of supplemental authority" filed to a New York district court on June 13. 

Later, on June 14, the SEC argued that Terraform and Ripple have different circumstances. 

"In asking the Court to tether its penalty determination in this case to the settlement in Terraform, Ripple fails to note that the corporate defendant there is in bankruptcy, going 'out of business for good,' burning the keys to all of its crypto asset securities, agreeing to return a significant amount to investors in those securities, and removing two of the board members in charge at the time of the violations," the SEC's lawyers said. 

"Ripple is agreeing to none of this relief—in fact, Ripple is agreeing to nothing," the SEC added. 

Terraform agreed to pay $4.47 billion as part of a settlement with the SEC, which was signed off by a judge last week. The settlement includes preventing Terraform co-founder Do Kwon from becoming an officer or director of any public company and blocks them from being involved in transactions involving "crypto asset securities."

How much?

In its push for lower fines, Ripple cited a jury's determination in April that Kwon engaged in civil fraud and that its own case with the SEC did not have allegations of fraud. Ripple ultimately said its civil penalty should not be more than $10 million.

Ripple also compares the size of the Terraform penalty to the amount of that defendant’s “gross sales,” arguing the Court should impose the same (1.27%) ratio

The fine amounts between the two firms were not an "apples-to-apples comparison," the SEC said on Friday, given that Ripple argued to compare the size of Terraform's penalty to "gross sales." That would give it a 1.27% ratio in the case of Ripple, added the SEC.

"Ripple avoids comparing the Terraform settlement’s penalty to the gross profit of the violative conduct," the SEC said. "That ratio ($420 million/$3.587 billion) is significantly higher: 11.7%. Applying it to the $876.3 million in gross profits the SEC here asks the Court to disgorge results in a much larger figure, a $102.6 million penalty, than the $10 million ceiling Ripple insists on.... And, for the reasons previously set forth, that low of a penalty would not satisfy the purposes of the civil penalty statutes."

Ripple Chief Legal Officer Stuart Alderoty pushed back on the SEC's response in a post on X over the weekend.

"The court gave clarity that XRP is not a security," Alderoty said. "There are no 'victims' to compensate. And worst of all for the @SEC, Ripple is thriving. But at least @SEC seems to have abandoned its absurd demand for $2B."

The SEC accused Ripple of raising $1.3 billion through the sale of XRP, which it says is an unregistered security. Last year, Judge Analisa Torres of New York ruled that some of Ripple’s sales, called programmatic, of XRP did not violate securities laws because of a blind bid process in place for them. She did, however, rule that other direct sales of the token to institutional investors were securities.