SEC vs Ripple: Tensions Rise as $2 Billion Penalty Gets Challenged

Ripple has filed a response to the SEC's $2 billion penalties against it.
SEC vs Ripple: Tensions Rise as $2 Billion Penalty Gets Challenged

Ripple vs SEC: The Case So Far

On December 22, 2020, the SEC filed a case against Ripple, alleging that it had engaged in the sale of unregistered securities. The case pertained to a sale that occurred in 2013, involving $1.3 billion worth of sales to both retail and institutional buyers

In April 2021, the SEC and Ripple Labs agreed to apply the Howey Test to XRP. This test, recommended by the US Supreme Court, is designed to determine whether the sale of a financial instrument constitutes a security

Finally, a summary judgement was given by the Federal District Court of Southern District of New York on July 13, 2023 by Judge Analisa Torres. The verdict was partially in favor of Ripple Labs as the court ruled that the retail sales of XRP did not amount to "security sales".

However, the judge also mentioned the need for a separate trial for institutional sales of XRP as it found there may have been an expectation of profit which might label institutional sales of XRP as " the sale of an unregistered security".

Ripple Reacts to $2 Billion Fine

As a settlement, the SEC has demanded a penalty of $2 billion from Ripple for a sale amount which was around $700 million.

The SEC has sought $876,308,712 for disgorgement, $198,150,940 as the prejudgment interest, and had also imposed a civil penalty of $876,308,712. The total fine came out to be 300% of the original sale where Ripple Labs sold XRP to various institutional buyers.

The amount was not only very high as a form of penalty but was also exceptionally higher than what the SEC had typically imposed in the past.

The legal team representing Ripple Labs has filed a response addressing the SEC's position regarding the sought-after significant penalty. A redacted version of Ripple Labs' filing is expected to be released shortly thereafter

SEC's Lawyers Resign Prior to Ripple Lab's Filing

In another case against, SEC lawyers Michael Welsh and Joseph Watkins had resigned after a federal judge clamped down on SEC's abuse of authority. The Wall Street regulator was handed a dressing down in a case related to Utah-based crypto firm Digital Licensing Inc.

Ripple CEO Brad Garlinghouse tweeted that he felt it was appropriate for the lawyers to resign the same day when Ripple Labs filed their statements.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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