March 27, 2024

SEC Pushes for $2 Billion Penalty in Final Ripple Judgement

The proposed $2 billion fine against Ripple includes disgorgement fees, prejudgment interest, and a substantial civil penalty.

The US Securities and Exchange Commission (SEC) is advocating for a monumental $2 billion fine to be imposed on Ripple Labs, as per recent court filings in New York.

In a social media update on Monday, Stuart Alderoty, Chief Legal Officer at Ripple Labs, revealed the SEC's pursuit of such a hefty penalty, with redacted versions of the documents published on March 26.

The SEC's proposal urges the court to mandate Ripple Labs to fork over $876 million in disgorgement, $198 million in prejudgment interest, and a staggering $876 million in civil penalties, summing up to a jaw-dropping $1.95 billion.

This legal saga traces back to December 2020 when the SEC initiated legal action against Ripple Labs and its executives, alleging violations of federal securities laws through the sale of XRP to both institutional and retail clients. In a pivotal ruling last July by New York Judge Analisa Torres, it was established that while the sale of XRP on exchanges and through algorithms didn't breach U.S. law, Ripple's institutional XRP sales did.

In its filing, the SEC implores the court to reflect on the ease with which actors, especially in the crypto asset realm, can mimic Ripple's conduct, emphasizing the need for a robust message against such misconduct.

Expressing discontent, Alderoty criticized the SEC's stance and affirmed that Ripple Labs will file its response to the SEC's motion in the coming month. The SEC's filing stipulates that the "Defendant’s response shall be filed no later than April 22, 2024".

Ripple Labs, the company behind the cryptocurrency XRP, has faced criticism and scrutiny over various aspects of its operations. Key concerns include the strong centralization of XRP, the initial distribution of XRP, the ongoing monthly inflation with token unlocks and Ripple's focus on its payment network, RippleNet. Some critics question the transparency of Ripple Labs and have accused the company of misleading marketing practices and self-enrichment schemes.

Ripple does not rely on a proof-of-work or proof-of-stake consensus mechanism like many other blockchains. Instead, it uses a consensus protocol that is controlled by a limited number of validators. Critics argue that this lack of mining and decentralization makes it essentially not a blockchain network but a centralized payment network.

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