Ripple cites Terra’s consent judgment in its new filing in the SEC case to support a request to pay a $10 million fine instead of the SEC’s proposed $2 billion penalty.
In a supplemental authority submitted in the Southern District of New York yesterday, Ripple referenced the recent Consent Judgment in the TerraForm Labs (TFL) case, whereby the SEC reached an agreement with the company for the disgorgement of over $3.58 billion and a civil penalty of $420 million.
Comparison Between Ripple and TerraForm Cases
According to Ripple, the agreed civil penalty in the TFL lawsuit represents 1.27% of the defendants’ gross sales, totaling $33 billion. Notably, Ripple compared the penalty in the TFL case to the SEC’s proposed fine of $2 billion following the sale of XRP to institutional investors.
Unlike the Ripple lawsuit, the TFL judge found one of the largest securities frauds in U.S. history, involving two massive fraudulent schemes leading to the loss of $40 billion in investors’ funds. Ripple also pointed out that TFL execs touted fictitious data to lure potential investors while conducting fraudulent practices behind the scenes to support the token’s price.
In addition to the TFL case, Ripple mentioned that the SEC usually requests a civil penalty between 0.6% and 1.8% in similar cases.
However, Ripple said the securities regulator requested a civil penalty far more significant than this range in its case despite no evidence of fraud. Additionally, Ripple noted that institutional investors did not incur any losses.
Top Lawyers Highlight Significance of Latest Filing
Expectedly, the filing sparked reactions across the broader crypto community as top lawyers highlighted its significance.
Reacting, famous pro-XRP lawyer Bill Morgan stated that Ripple’s recent filing underscores the peculiar hostility that the SEC constantly shows towards the crypto payments company.
“The behavior of the SEC towards Ripple is very ill-motivated,” Attorney Morgan remarked.
In response, former securities lawyer Marc Fagel suggested that the SEC’s leniency in the TerraForm lawsuit was due to the settlement status.
Moreover, he said the penalty in the TerraForm settlement is fictional, emphasizing that the money is gone. Fagel added that there is no guarantee that the SEC will receive anything close to the requested amount.
Of course, those are settled cases; that's the benefit to a defendant of settling. (Plus, in TerraForm it's not real money; the money is gone, so the penalty is kind of a fiction in any event.) Which isn't to say the SEC will get anything close to what it demands here.
— Marc Fagel (@Marc_Fagel) June 14, 2024
Notably, CryptoQuant CEO Ki Young Ju questioned where Terraform Labs would get the funds to settle the SEC, seeing as it claimed to have depleted its reserves in a bid to maintain the UST peg during the Terra collapse two years back.
Current Status of SEC v. Ripple
Meanwhile, although the SEC seeks a nearly $2 billion fine in the Ripple lawsuit, the defendant contended that the civil penalty should not exceed $10 million. The parties have submitted the necessary filings and are awaiting the court’s final verdict, which could come at any time.
As reported yesterday, Ripple CEO Brad Garlinghouse estimated that the court would issue its final verdict before September 21, which marks the end of astronomical summer. It remains to be seen whether Garlinghouse’s projection would materialize.
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