The U.S. Securities and Exchange Commission (SEC) has firmly opposed Ripple’s claim that it should pay significantly lower fines in the ongoing legal dispute over the sale of XRP tokens. In a recent court filing, the SEC argued that Ripple’s proposed penalty of around $10 million would be a mere “slap on the wrist” compared to the nearly $2 billion fine the regulator has suggested.
The legal battle between the SEC and Ripple has been raging since December 2020, with the SEC accusing the company of raising $1.3 billion through sales of the XRP token, which it considers an unregistered security. On 13 July 2023, Judge Analisa Torres of New York ruled that some of Ripple’s programmatic sales of XRP did not violate securities laws due to a blind bid process in place. However, she also determined that other direct sales of the token to institutional investors were indeed securities.
In its opposition motion filed last month, Ripple contended that the fines should be much lower than the SEC’s proposed figure, suggesting that a fine of $10 million was much more appropriate given the circumstances than the nearly $2 billion, which the SEC is demanding. The SEC, however, maintains that Ripple’s suggested penalty would be inadequate and could encourage other crypto asset issuers to violate Section 5 of the Securities Act. The regulator’s lawyers argued that such a low fine would make it a “remarkably lucrative endeavor” for companies to disregard securities laws and deprive investors of the disclosures mandated by Congress.
The SEC also took issue with Ripple’s assurances to the court that it would not violate the law again in the future. Ripple pointed to various licenses it has obtained from different jurisdictions, some of which do not treat XRP sales as sales of securities. The SEC’s lawyers dismissed this argument, likening it to a New York restaurant claiming it doesn’t need a liquor license because it obtained a fishing license in California.
The SEC argues that Ripple’s claims of adhering to legal guidelines and restructuring its XRP sales in response to the court’s orders are inaccurate. According to the SEC, Ripple is misinterpreting the court’s orders and not fully acknowledging their compliance implications, thereby not justifying the avoidance of injunctions.
Yesterday, Ripple’s Chief Legal Officer, Stuart Alderoty, criticized the SEC on social media platform X for its handling of the ongoing lawsuit against Ripple. Alderoty accused the SEC of incorrectly applying the law and attempting to deceive the court. He expressed optimism about Ripple nearing the end of this legal battle while noting that others are just beginning to face similar challenges. He conveyed confidence in the court’s fairness in the upcoming remedies phase. Furthermore, Alderoty harshly criticized the SEC’s regard for international financial regulators, suggesting that the SEC dismisses the efforts of those who have established comprehensive cryptocurrency licensing frameworks, comparing them to mere fishing licenses.
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