Ripple Blasts 'Disproportionate' SEC Case Fine, Cites Terraform Labs Settlement

Ripple Labs, the tech company behind the Ripple payment protocol, has pushed back against the U.S. Securities and Exchange Commission's (SEC) proposal for a staggering multi-billion-dollar fine against Ripple.

In a Thursday "notice of supplemental authority" sent to the judge overseeing the case filed by the SEC against Ripple, the company's legal counsel said the court should reject the Wall Street regulator's "disproportionate and unprecedented request" for nearly $2 billion in fines.

Attorney Michael K. Kellogg argued that in the recent settlement agreement between the SEC and Do Kwon's Terraform Labs, the defendants agreed to pay some $4.5 billion in fines. Unlike the Ripple case, Kwon and the collapsed crypto ecosystem he founded was found to have "intentionally and recklessly" orchestrated one of the largest securities frauds in the country.

Investors lost billions when the crypto empire around the once-popular Terra and Luna tokens collapsed in 2022. Kwon, the crypto firm's co-founder and former CEO who is jailed in Montenegro, now has to pay over $200 million from his own pocket to cover the multi-billion-dollar penalty under the settlement agreement with the SEC.

"The civil penalty sought by the SEC in Terraform demonstrates the unreasonableness of the civil penalty sought by the SEC in this case," Kellogg said. He argued further that in its case against Ripple, wherein the company is accused of violating securities laws by selling unregistered securities, the fines being sought are "far exceeding," considering how "there are no allegations of fraud in this case and Institutional Buyers did not suffer substantial losses."

As opposed to the SEC's proposed fines, Ripple said "no more than $10 million" was more appropriate in the case.

Ripple's latest filing follows the SEC's final court filing in the case lodged last month wherein it said a huge penalty was necessary to "deter" the company from future violations. It insisted that courts "regularly impose penalties that equal defendants' ill-gotten gains."

Ripple CEO Brad Garlinghouse has said there was "absolutely no precedent" for the staggering $2 billion that the SEC seeks in fines against the company. He slammed the regulatory agency for allegedly making false and mischaracterized statements meant to mislead people regarding companies it targets.

Meanwhile, Ripple continues to expand its business as it recently completed an acquisition of New York Department of Financial Services-regulated crypto custodian Standard Custody & Trust Company. The acquisition is expected to help propel Ripple toward its goal of launching a U.S. dollar-backed stablecoin.