SEC refutes Ripple: Terra settlement is different in nature from LUNA incident

This site (120bTC.coM): The U.S. Securities and Exchange Commission (SEC) sued Ripple in December 2020, accusing it of registering " Securities" (XRP) raised funds, amounting to US$1.3 billion. Although Ripple won an initial victory in the case in July last year, the two parties have not yet reached an agreement on the fine, and the legal battle between the two parties is still continuing.

The total amount of fines previously imposed by the SEC against Ripple is close to US$2 billion, including US$198.2 million in prejudgment interest, US$876.3 million in civil penalties, and US$876.3 million in illegal gains.

Ripple requested that the civil penalty be reduced to $10 million

On June 13, Ripple cited the SEC’s settlement agreement with Terraform Labs and once again appealed to Judge Analisa Torres of the U.S. District Court for the Southern District of New York. Requests a civil penalty not to exceed $10 million. Ripple’s lawyers said: In similar (and even more serious) cases, the Securities and Exchange Commission (SEC) has agreed to civil penalties ranging from 0.6% to 1.8% of the defendants’ gross income. The Terraform case fits this pattern. In this case, the SEC pursued a civil penalty that went well beyond that, even though there were no allegations of fraud and the institutional buyers did not suffer significant losses. Therefore, the Terraform case confirms that courts should deny the SEC’s disproportionate and unprecedented demands and that appropriate civil penalties should not exceed $10 million.

Rejecting Ripple’s request to lower the fine

However, in a letter to Analisa Torres the next day (14), the SEC rejected Ripple’s argument for lowering the fine: 45 reached with Terraform Labs and its co-founder Do Kwon The $420 million settlement, which included a $420 million civil penalty, came after the company, now bankrupt, agreed to return funds to investors and fire the person responsible for the violations at the time. Ripple did not agree to any of these remedies—in fact, Ripple agreed to none.

In addition, the SEC also stated that Ripple believed that Terraform Labs’ $420 million in civil penalties accounted for 1.27% of its $33 billion in total sales, but this is not an equal comparison. The SEC added that Terraform Labs’ fine was estimated based on the gross profit of the violation, which was more than $3.5 billion, accounting for nearly 12%.

The SEC believes that if the same ratio was applied to the $876.3 million in gross profits that Ripple was required to hand over, the civil penalty would be $102.6 million. Regarding the $10 million civil penalty proposed by Ripple, the SEC added: Such a low penalty does not meet the purpose of the civil penalty statute.

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