Ripple defends SEC: Should only pay $10 million instead of the fine recommended by SEC

Ripple wants to pay only a $10 million civil penalty and says the SEC has failed to show why an injunction and disgorgement are needed.

San Francisco-based leading crypto payments company Ripple has filed a letter of objection to the SEC’s request that it pay a nearly $2 billion fine on the grounds that its institutional sales of XRP violated securities laws. Notably, veteran crypto attorney James K. Phelan shared this development on X.

For background, according to the SEC’s open-ended request for relief, the regulator seeks a civil penalty of $876.3 million, plus $876.3 million in disgorgement, and $198.15 million in prejudgment interest, for a total proposed penalty of $1.95 billion.

Ripple’s three main arguments

According to the opposition filed yesterday, Ripple has made three main arguments to fight the SEC’s high demand of nearly $2 billion.

First, Ripple argues that regulators have not proven whether a ban is necessary. The leading crypto payments company claims the SEC failed to establish a reasonable probability of future violations in its institution-related XRP sales.

As for the second argument, Ripple stressed that the SEC also failed to prove that restitution was required in this case.

Ripple, as expected, cited the Second Circuit ruling in the Govil lawsuit that barred the returns because the regulator could not prove that investors suffered financial harm.

Additionally, Ripple cited the 2020 Liu case, which stated that restitution should be limited to the net profits of securities law violators. Specifically, Ripple argued that the court should deduct its legitimate business expenses from the restitution amount awarded to the SEC.

Finally, Ripple argued that any civil penalty should be capped at $10 million, rather than the $876 million the SEC had sought. Notably, Ripple argues that the facts of the case support a lower civil penalty against the SEC, rather than its high request.

Ripple vs. SEC: The Next Phase

Meanwhile, the SEC will file its objection to Ripple’s relief on May 6, 2024. After that, the court will make a final judgment.

As reported earlier, Ripple CTO David Schwartz expects a final settlement to be reached before the end of the year.

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