Key Takeaways:
- SEC slashes Ripple settlement from $2B to $102.6M after Ripple cites Terraform’s $4.4B deal.
- SEC rejects Ripple’s Terraform Labs comparison, citing unique factors like bankruptcy and investor returns.
In a dramatic turn of events, the U.S. Securities and Exchange Commission (SEC) has significantly reduced its proposed settlement with Ripple from an initial $2 billion to $102.6 million.
This development, highlighted in a legal document dated June 14, 2024, and shared by defense lawyer James Filan, marks a substantial shift in the ongoing legal saga between the SEC and the blockchain company.
The SEC’s decision to lower the penalty follows Ripple’s recent proposal of a $10 million settlement, which was justified by referencing the Terraform Labs case. However, the SEC argued that such a low penalty “would not satisfy the purposes of the civil penalty statutes.”
In a letter to District Judge Analisa Torres, the SEC clarified their stance, stating that comparing Ripple’s situation to Terraform’s was not appropriate.
Terraform Labs, the company behind the Luna cryptocurrency, had settled with the SEC for $4.4 billion on June 13. The SEC noted that Terraform Labs was in bankruptcy, had agreed to burn all of its crypto asset securities, return a significant amount to investors, and remove key board members responsible for the violations.
These factors, the SEC argued, made the Terraform case an unsuitable benchmark for Ripple’s penalty.
Ripple’s legal team has been advocating for a more reasonable penalty, pointing to past SEC settlements where penalties ranged between 0.6% and 1.8% of the defendant’s revenue.
Ripple’s proposal of a $10 million settlement stands in stark contrast to the SEC’s revised figure of $102.6 million, which, while significantly lower than the initial $2 billion, still aims to deter future violations.
The SEC emphasized that Ripple had not agreed to similar relief measures as Terraform Labs, such as token dissolution or significant investor returns, influencing the SEC’s settlement approach.
Despite these arguments, the ongoing legal battle has centered on whether Ripple’s XRP token constitutes an unregistered security, a claim first made by the SEC in December 2020.
This legal dispute has been a pivotal narrative in the crypto industry, especially after a 2023 court decision favored Ripple by declaring XRP not a security in programmatic sales. However, the broader lawsuit persists, with a trial date still pending.
The revised settlement proposal underscores the SEC’s commitment to maintaining regulatory standards while adjusting to the evolving landscape of cryptocurrency regulation.
As the crypto world watches closely, the outcome of this case will likely have significant implications for future regulatory actions and the broader acceptance of cryptocurrencies in mainstream finance.
