Judge Torres Orders Ripple to Pay $125 Million in Civil Penalties, Issues Injunction to Prevent Future Violations of Securities Laws

The decision ends the SEC's case against Ripple, however, it is expected that the agency will appeal. Despite the SEC's unsuccessful attempt to appeal this aspect of the case, the injunction against future violations indicates a judicial caution towards Ripple's potential to “cross the line” with its “on-demand liquidity” offerings.

A federal court has ordered Ripple to pay $125 million in civil penalties and imposed an injunction to prevent future violations of securities laws on Wednesday.

The decision was made by District Judge Analisa Torres of the Southern District of New York, who ruled that 1,278 institutional sales by Ripple breached securities regulations, leading to a $125.035 million penalty. This amount is notably lower than the $1.9 billion total in disgorgement, prejudgment interest, and civil penalties initially sought by the SEC.

The ruling follows Judge Torres' July 2023 verdict that Ripple's direct sales of XRP to institutional clients violated federal securities laws, though she found no violations in Ripple's programmatic sales to retail clients via exchanges.

The decision concludes the SEC's case against Ripple, though the agency is expected to appeal.

While the SEC's attempt to appeal this aspect of the case was unsuccessful, the injunction against future violations indicates a judicial caution towards Ripple's potential to “cross the line” with its “on-demand liquidity” offerings.

Emphasizing the possibility of future violations to justify the injunction, Judge Torres noted a “reasonable probability” that Ripple might again breach securities laws. Furthermore, Ripple is required to file a registration statement for any future securities sales.

This development follows the SEC's failed motion for an interlocutory appeal last year and a settlement with Ripple executives, including CEO Brad Garlinghouse, on related charges.

Commenting on XRP following the ruling, Garlinghouse said, "The SEC asked for $2B, and the Court reduced their demand by ~94% recognizing that they had overplayed their hand. We respect the Court’s decision and have clarity to continue growing our company. This is a victory for Ripple, the industry and the rule of law. The SEC's headwinds against the whole of the XRP community are gone."

Crypto lawyer and attorney Fred Rispoli wrote on X, “Overall, HUGE win for Ripple. Although I'm surprised at the $125M hit, Ripple more than made that just on the price move in $XRP in the last 5 minutes. Here are the major takeaways from the ruling:

- Judge Torres found 1,278 institutional XRP sales violated securities laws and that no sales to retail via exchanges violated securities laws.

- The Court imposed a civil penalty of $125,035,000 on Ripple. This is less than 7% of what the SEC asked for.

- The Court also entered an injunction against Ripple that will prevent them from future violations and will require them to file a registration statement for any future securities sales.

- The SEC is expected to appeal this decision, but they will need to get Judge Torres to certify the decision for an interlocutory appeal or get the Second Circuit to grant them permission to appeal early.”

Following the judgement, XRP's price saw an immediate jump of 20%.

Source: BNC XRP Liquid Index (XRPLX)

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