Ripple, Terraform Labs Lawsuits Reach Decisive Phase in SEC's Crypto Enforcement Drive

The SEC's legal battles with Ripple Labs and Terraform Labs saw significant developments. Ripple disputes the SEC's $1.284 billion settlement proposal, countering with a $10 million penalty and arguing lack of provable investor harm. The SEC's suit against Terraform Labs and Do Kwon seeks hefty penalties exceeding $5.2 billion, while the defendants propose a reduced $3.5 million fine for Terraform and $800,000 for Kwon.

SEC's Ongoing Battles with Ripple Labs and Terraform Labs Reach Critical Juncture

Washington, D.C., April 24, 2024 - The United States Securities and Exchange Commission (SEC) continues to wage legal battles against two prominent cryptocurrency companies: Ripple Labs, the creator of the XRP token, and Terraform Labs, the developer of the now-defunct TerraUSD stablecoin.

Ripple Lawsuit Nears Resolution

The Ripple lawsuit, which began in December 2020, is reportedly nearing its conclusion. On April 22, Ripple filed its objection to the SEC's proposed settlement, which seeks a total of $1.27 billion in damages, prejudgment interest, and fines.

Ripple acknowledges the court's ruling that its XRP sales violated Section 5 of the Securities Act. However, the company objects to the SEC's "excessive demands," arguing that there is no evidence of negligence or fraud in the SEC's case. Ripple proposes a maximum fine of $10 million, citing the SEC's weak arguments and precedent in other crypto asset cases.

Ripple's Chief Legal Officer, Stuart Alderoty, criticized the SEC's demands as an "intimidation against all cryptocurrencies in the US." He expressed confidence that Judge Analisa Torres will make a fair decision at the final settlement stage.

Terraform Labs Faces Substantial Penalties

On April 19, the SEC filed a similar lawsuit against Terraform Labs and its co-founder, Do Kwon. The complaint alleges that Terraform's sale of the TerraUSD stablecoin constituted an unregistered securities offering.

The SEC is seeking $4.7 billion in damages and pre-judgment interest, as well as a $520 million fine against Terraform and Kwon. Terraform has proposed a much lower fine of $3.5 million, while Kwon seeks a penalty of only $800,000.

The SEC is also recommending a series of measures to prevent future abuses by Terraform Labs, including barring Do Kwon from holding officer or director positions in companies that issue securities and implementing "behavior-based action" on the company.

Legal Experts Weigh In

Legal experts have expressed varying opinions on the outcome of the Ripple and Terraform lawsuits. Some believe that Ripple's arguments against the SEC's excessive demands may be persuasive. However, others suggest that the SEC's strong case against Terraform Labs may lead to significant penalties.

The SEC's actions against Ripple and Terraform Labs have sent shockwaves through the cryptocurrency industry. The outcome of these cases will have a profound impact on the regulation of crypto assets in the United States and around the world.