Ripple Counters SEC's $2 Billion Penalty Demand, Files Rebuttal

Ripple Labs contested the SEC's request for close to $2 billion in fines stemming from the sale of XRP to institutional investors, arguing the figure should not exceed $10 million. Ripple maintains that its sales did not constitute unregistered securities and that the SEC's request is excessive given the absence of fraud or recklessness allegations. Despite a ruling that some XRP sales violated securities laws, Ripple claims to have adjusted its practices to comply with the court's findings.

Ripple Labs Counters SEC's $2 Billion Penalty Demand, Submits Rebuttal

In a comprehensive court document filed late on Monday, Ripple Labs has vehemently contested the Securities and Exchange Commission's (SEC) relentless pursuit of punitive penalties amounting to nearly $2 billion.

This development follows the SEC's declaration last month that Ripple should be held liable for approximately $2 billion in fines for allegedly distributing XRP to institutional investors without registering it as a security. However, Ripple maintains that the appropriate penalty figure should be closer to a modest $10 million, as outlined in its opposition motion.

"Our vehement objection to the SEC's exorbitant request for $2 billion in penalties for historical institutional sales is now a matter of public record," affirmed Stuart Alderoty, Ripple's Chief Legal Officer, in a statement released on Monday. "In a case conspicuous by the absence of allegations or findings of recklessness or fraudulent intent, and in which Ripple prevailed on several crucial issues, the SEC's demand is merely further evidence of its persistent crusade to intimidate and stifle the entire cryptocurrency industry within the United States."

Alderoty expressed unwavering confidence in the presiding judge's impartial approach to the final remedies phase of the proceedings.

A Protracted Legal Battle

For several years, the SEC and Ripple have been embroiled in a contentious legal dispute, stemming from the SEC's accusations that Ripple illicitly raised $1.3 billion through the sale of XRP, which the agency contends constitutes an unregistered security. In a significant ruling last year, Judge Analisa Torres of New York determined that certain of Ripple's programmatic XRP sales did not transgress securities regulations due to the implementation of a blind bid process. However, she did conclude that other direct sales of the token to institutional investors did indeed qualify as securities.

The SEC has asserted that Ripple has generated billions of dollars in institutional XRP sales and, in its court filing last month, argued that Ripple "continues to possess the largest XRP holdings of any individual or entity and persists in selling it, unregistered, to institutional purchasers."

Ripple contends that it has implemented substantial revisions to its XRP sales practices in the wake of last year's court ruling.

"Ripple unequivocally acknowledges and abides by the court's decree. It has modified its XRP sales strategy and revised its contracts to rectify the concerns raised by this Court," the company stated in Monday's filing.

The SEC has yet to issue an official response to a request for comment.

Contesting the SEC's Proposed Judgment

In its proposed final judgment, the SEC sought to impose penalties totaling nearly $2 billion on Ripple Labs, including $876 million in disgorgement, $198 million in prejudgment interest, and a staggering $876 million civil penalty. The agency implored Judge Torres to consider the "egregiousness" of the firm's alleged misconduct.

On Monday, Ripple countered by arguing that the SEC has failed to establish a compelling case for disgorgement and that prejudgment interest should be dismissed. The company also maintained that any civil penalty imposed should not surpass $10 million.

"Ripple's conduct was far from egregious," the company asserted in its filing. "Its institutional sales were conducted over an eight-year period, involving forty-one 'sophisticated individuals and entities.' These entities were fully cognizant of the transactions they were engaging in and made their decisions based on their own financial interests. There is no allegation that Ripple misled or deceived them."

The outcome of this ongoing legal battle will have significant implications for the cryptocurrency industry, as it could set a precedent for how regulators approach the regulation of digital assets.