As an experienced financial analyst, I believe that the SEC’s proposed $2 billion penalty for Ripple seems disproportionate and excessive based on previous cases with similar allegations. The comparison of the case to the Terraform Labs settlement, which resulted in a fine much lower than the SEC’s proposal, highlights this disparity. Furthermore, the lack of direct fraud allegations against Ripple adds to the uncertainty surrounding the penalty’s justification.
TL;DR
- Ripple contends that the SEC’s proposed $2 billion penalty is excessive, suggesting a fine of no more than $10 million.
- The company’s CEO anticipates a resolution by summer 2024, though the complex legal process could cause delays.
Ripple’s Arguments
The long-standing dispute between Ripple and the US Securities and Exchange Commission (SEC) over alleged unregistered securities offerings involving the sale of XRP tokens is now in its trial phase, which has been ongoing for over three years. The central issue of the lawsuit revolves around the SEC’s accusations against the company and certain executives.
Earlier this year, the SEC sought a $2 billion penalty on the firm alleging the aforementioned violations. Ripple did not welcome the idea, with chief legal officer Stuart Alderoty arguing the fine should not exceed $10 million.
Most recently, the company’s legal team has strengthened their argument, drawing comparisons to the case involving Terraform Labs. You might recall that Terraform Labs, a defunct cryptocurrency firm, admitted fault and agreed to pay a hefty fine of $4.47 billion for their deceitful actions. This penalty consisted of $3.6 billion in compensation for the damages caused, $466 million in interest on those damages, and a civil penalty of $420 million.
According to the defense’s argument, the SEC has historically imposed civil penalties amounting to between 0.6% and 1.8% of a wrongdoer’s total revenue. Based on this precedent, they contend that Terraform Labs falls within this range. Consequently, the lawyers propose a penalty for Ripple not exceeding $10 million as a fitting fine.
The lawyers pointed out that a Manhattan jury had previously determined that Terraform Labs and its founder Do Kwon were responsible for civil charges and had allegedly masterminded “one of the largest securities frauds” in US history. However, they emphasized that there weren’t any accusations of fraud specifically levied against Ripple in its ongoing dispute with the SEC.
Is the Lawsuit Nearing a Resolution?
Despite being in its trial phase, the legal dispute could last for years due to the intricacy of the proceedings and potential delays and appeals from both sides. According to Brad Garlinghouse, Ripple’s CEO, however, a resolution might be reached as early as this summer.
He recently stated, “I believe it will be sometime before the summer’s end. Someone inquired about late August, but I reminded them that September 21 marks the end of summer.”
Another individual holding this view, specifically American attorney Jeremy Hogan, anticipates that the case could reach its formal conclusion within the upcoming months. He has proposed a potential settlement amounting to $100 million.
As a researcher, I would express it this way: “I propose that the judge decides not to impose any disgorgement on Ripple but shows leniency towards the Securities and Exchange Commission (SEC) by ordering a fine of $100 million to be paid by Ripple instead.”
In the ongoing lawsuit between the SEC and Ripple, some observers might consider the Securities and Exchange Commission as the underdog. The company has managed to secure three partial court victories throughout 2023, which have been followed by positive price reactions for XRP. A definitive win could potentially lead to a significant surge in XRP’s value. For those interested in learning more about this legal battle and its influence on Ripple’s native token, please check out the informative video we have prepared below.
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2024-06-14 13:08