SEC Seeks $2 Billion Penalty in Ripple XRP Suit

The SEC implores Judge Analisa Torres to impose fines exceeding US$2 billion on Ripple Labs for allegedly contravening securities laws through the sale of XRP tokens to institutional investors. Despite facing legal action, the SEC claims that Ripple has escalated XRP sales, evaded liability, and disregarded legal counsel against promoting it as an investment. The agency maintains that substantial sanctions are necessary to deter Ripple's noncompliance with securities laws and recover ill-gotten gains.

SEC Demands $2 Billion Penalty for Ripple's XRP Sales

In a blistering brief filed in federal court, the Securities and Exchange Commission (SEC) has recommended the imposition of penalties exceeding $2 billion on Ripple Labs for its sale of unregistered XRP tokens. The regulator's unwavering stance stems from Ripple's alleged disregard for securities laws, ongoing cryptocurrency sales, and failure to acknowledge culpability.

"Ripple's sustained defiance and refusal to rectify its unlawful conduct necessitates a significant penalty to deter further violations," the SEC stated in its filing.

According to the SEC, Ripple has continued to market and sell XRP since the commencement of the lawsuit, disregarding legal advice to cease such activities. The firm's actions, the agency claims, demonstrate a blatant disregard for the rule of law and an intention to evade regulation.

"Ripple has benefited financially from promoting XRP as an investment, while actively resisting disclosure requirements that would have hindered its lucrative enterprise," the SEC alleged. "Only a substantial fine and disgorgement of illegal profits will compel Ripple to rectify its behavior or cease selling unregistered securities."

Ripple's Chief Legal Officer, Stuart Alderoty, maintains that the SEC's pursuit of punitive measures is a misguided attempt to stifle the blockchain industry and that he has confidence in the court's fairness in adjudicating the remedy phase.

The SEC's lawsuit against Ripple, filed in 2020, alleges that the company violated securities laws by raising capital through the sale of XRP without registering it as an investment contract. The case has garnered significant attention within the cryptocurrency community, as it potentially defines the SEC's regulatory reach over digital assets.

In a pivotal ruling in July 2022, Judge Analisa Torres determined that XRP sales via exchanges to retail investors did not constitute investment contracts, which are subject to SEC regulation. This decision was widely perceived as a setback for the SEC's authority over cryptocurrencies.

Despite the setback, the SEC remains steadfast in its belief that Ripple violated securities laws by offering XRP as an investment to institutional investors. The agency's brief cites the company's internal documents, marketing materials, and statements by executives as evidence of its intent to sell XRP as an investment contract.

The SEC argues that Ripple's failure to register its XRP sales with the agency deprived investors of crucial information about the company's financial health and business operations, leaving them vulnerable to potential losses.

The agency further asserts that Ripple's refusal to acknowledge responsibility and its continued sale of XRP demonstrate a persistent disregard for securities laws. It maintains that substantial penalties are necessary to deter future violations and protect investors from similar misconduct.

The impact of the SEC's case against Ripple and the potential penalties it faces could have far-reaching consequences for the cryptocurrency industry. It remains to be seen whether Judge Torres will accept the SEC's recommendations for fines and penalties or issue a more lenient judgment. The company is scheduled to respond to the agency's brief next month.