Ripple points to the recent Terraform Labs settlement in an attempt to reduce their own fine from the US Securities and Exchange Commission (SEC).
Earlier this week, the SEC reached a $4.47 billion settlement with Terraform Labs after the stablecoin company was found liable for defrauding investors of $40 billion in the 2022 collapse of TerraUSD and Luna.
The settlement includes $4.05 billion in disgorgement plus interest, in addition to a $420 million civil penalty, plus an $80 million fine for the company’s disgraced founder, Do Kwon.
Ripple’s lawyers note that the $420 million civil penalty represents about 1.27% of Terraform Labs’ $33 billion in gross revenue, according to court documents shared by James K. Filan, an attorney and crypto legal expert .
Ripple’s lawyers claim that the civil penalty imposed on Terraform “demonstrates the unreasonableness” of the civil penalty imposed by the SEC in their own case.
“As Ripple’s opposition has explained, in similar (and even more egregious) cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross revenues. Terraform fits that pattern. Here, by contrast, the SEC is seeking a civil penalty that far exceeds that range, even though there are no allegations of fraud in this case and institutional buyers have not suffered substantial losses.
The SEC first sued the San Francisco-based payments company in late 2020 for allegedly selling XRP as an unregistered security.
Last summer, U.S. District Judge Analisa Torres ruled that Ripple’s automated, open-market sale of XRP, also known as programmatic sales, did not constitute a security offer, contrary to what the SEC alleged.
However, the judge sided with the SEC’s contention that Ripple’s sale of XRP directly to institutional buyers constituted an offering of securities.
In March, the SEC asked the court to order the company to pay $876,308,712 in disgorgement, $198,150,940 in prejudgment interest and a civil penalty of $876,308,712, totaling about $1.95 billion.
Ripple’s lawyers have argued that $10 million would reflect an appropriate percentage of the company’s actual gross revenues from pre-complaint institutional sales.
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