The legal battle between Ripple and the Securities and Exchange Commission (SEC) is getting heated and, following recent developments, looks far from over. This is due to the disagreement between both parties on the appropriate remedy for Rippleâs violation of securities laws.Â
Ripple Proposes $10 Million Fine InsteadIn opposition to the SECâs motion for remedies and entry of final judgment, Ripple has proposed that the court should not impose a civil penalty of not more than $10 million. This figure represents a far cry from the SECâs proposed judgment. The Commission had earlier asked the court to order Ripple to pay the sum of $1,950,768,364 as a pecuniary fine for violations relating to its institutional XRP sales.
Specifically, the SEC proposed that Ripple pay a civil penalty of $876,308,712 alongside a prejudgment interest of $198,150,940 and disgorgement of $876,308,712, which represents the profits from its violation of the Securities Act. However, Ripple asked the court to deny the requests for disgorgement and pre-judgment interest and only focus on the civil penalty, which shouldnât be more than $10 million.Â
Rippleâs lawyers also laid out arguments as to why the civil penalty should not exceed $10 million. Firstly, they stated that the first tier of the statutory maximum penalties is what applies to this case âbecause the SEC has never alleged fraud, deceit, or manipulation and has failed in its belated attempt to show that Ripple recklessly disregarded the law.â
Therefore, Ripple argued that the Commissionâs request for a civil penalty of over $876 million isnât the appropriate remedy for the first-tier structure. They added that the companyâs revenue from pre-complaint institutional sales should be the only earnings considered when deciding on a remedy, which makes a civil penalty of not more than $10 million more appropriate.Â
Accounting Error From The SECRipple suggested that the SEC made an error in calculating the companyâs earnings while deciding on the right amount for which the crypto firm should be fined. According to the companyâs lawyers, the Commission failed to âanalyze or even consider any other categories of Rippleâs expenses.â
Meanwhile, they allege that the SEC didnât offer any evidence or explanation âfor why cost if revenue is the only category of Rippleâs deductible expenses.â Simply put, Ripple argues that the regulator, while calculating Rippleâs earnings, didnât consider how much the company expended before deciding that almost $2 billion was an appropriate fine.Â
Rippleâs lawyers made this argument while stating that the SEC also erred in relying on the declaration of Andrea Fox, an accountant at the agency. They claim that the SEC never disclosed Fox as a fact or expert witness and that she wasnât deposed during the initial discovery or supplemental remedies discovery. Therefore, they moved to strike her declaration as an âuntimely disclosed expert report.â
Ripple Also Opposes SECâs Proposed InjunctionAs part of its entry for final judgment, the SEC had asked the court to âpermanentlyâ restrain and enjoin Ripple from âdirectly or indirectly conducting an unregistered offering of Institutional Sales.â Understanding how this could affect their ODL transactions, Ripple has asked the court to deny the request for an injunction.Â
The crypto firm argues that the Commission has failed to show why an injunction is warranted. Injunctions are usually granted when there is a fear of future violations. Ripple claims that the SEC has failed to show a âreasonable likelihood of future violations.âÂ
The crypto firmâs lawyers further revealed that Ripple has âchanged the way it sells XRP and changed its contracts to avoid any future violations.â To show good faith, they submitted a declaration by Rippleâs President, Monica Long, which describes the steps the company has taken to avoid future violations.Â