San Francisco, CA – Ripple Labs, a blockchain payments company, is facing a new challenge in its ongoing legal battle with the United States Securities and Exchange Commission (SEC). XRP enthusiasts are criticizing the commission’s recent request for remedies, calling it an abuse of power.
The SEC filed its remedy request against Ripple on March 22, seeking a staggering $1.95 billion in fines and penalties. This demand stems from Ripple’s alleged unregistered securities offering through XRP institutional sales.
Interestingly, the requested fine exceeds the amount Ripple gained from the securities violation. The company raised $728.9 million from its institutional sales of XRP between 2013 and 2020.
This disproportionate demand by the SEC has sparked reactions within the XRP community. Critics argue that the commission’s request is driven by animosity towards Ripple. Notably, prominent law professor J.W. Verret highlighted the significant disparity between the SEC’s demand against Ripple and its typical recovery percentage in other similar cases involving federal securities law violations.
Verret pointed out that in cases such as Kik, Kraken, LBRY, and Telegram, the SEC typically requests around 11% recovery. For example, in the case against LBRY, the SEC collected $111,614, which represented 11% of the company’s $11 million raised from LBRY Credit (LBC) sales. However, the regulatory agency is now seeking a 300% recovery from Ripple, according to Verret.
This glaring disparity has led some to accuse the SEC of abusing its regulatory power. Australian-based lawyer Bill Morgan also weighed in, characterizing the commission’s demand as a means of exerting control over the crypto industry. Morgan believes the SEC has a deep-rooted disdain for Ripple due to the company’s resistance throughout the lawsuit process.
In the larger context, the SEC has been actively pursuing regulatory control over the cryptocurrency sector. It has filed lawsuits against other crypto entities like Binance, Coinbase, Kraken, and Ripple. However, the case against Ripple has deviated from the SEC’s expected outcome, with the legal battle ongoing since December 2020.
Ripple has achieved several victories in the case, with the court ruling that XRP itself is not a security. The court also determined that Ripple’s programmatic sales and other distributions of XRP do not constitute investment contracts. Additionally, the SEC dropped its charges against Ripple executives Brad Garlinghouse and Chris Larsen.
The court’s decision regarding the SEC’s remedies demand of $1.95 billion against Ripple is yet to be determined. Ripple will present its opposition to the SEC’s opening brief later this month, providing facts and evidence to argue for a lesser penalty. The SEC will file its final brief in the remedies stage by May 6, after which the court will issue the final judgment at a later date.
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