Ripple is seeking to pay only $10 million as a civil penalty for violating securities law, arguing that the SEC has not provided sufficient evidence to support an injunction and disgorgement.
The San Francisco-based crypto payments company, Ripple, has filed its opposition brief in response to the SEC’s request for a payment of nearly $2 billion for its XRP institutional sales, which the regulator claims violated securities law. Notably, crypto lawyer James K. Filan shared this development on X.
To provide context, the SEC’s opening remedies brief requested a civil penalty of $876.3 million, disgorgement of another $876.3 million, and prejudgment interest of $198.15 million, totaling a proposed fine of $1.95 billion.
Ripple has presented three major arguments in its opposition brief to counter the SEC’s demand. Firstly, Ripple argues that the SEC has not provided sufficient justification for the necessity of an injunction. The company asserts that the SEC has failed to demonstrate a reasonable possibility of future violations in its institutional-related XRP sales.
Secondly, Ripple emphasizes that the SEC has not shown the need for disgorgement in this case. The company cites the Second Circuit ruling in the Govil lawsuit, which prohibits disgorgement when the regulatory agency cannot prove that investors suffered financial harm. Ripple also references the Liu ruling in 2020, which stated that disgorgement should be limited to the net profits of a securities act violator. Ripple argues that the court should deduct its legitimate business expenses from any disgorgement amount awarded to the SEC.
Lastly, Ripple argues that any civil penalty should be no more than $10 million, rather than the $876 million sought by the SEC. The company states that the facts of the case support a lower civil penalty rather than the excessive demand made by the SEC.
The SEC will file its reply to Ripple’s opposition brief on May 6, 2024, and the court will subsequently issue its final judgment. Ripple CTO David Schwartz expects a resolution to be reached before the end of the year.
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