The penalty is considerably lower than the nearly $2 billion initially sought by the SEC as the court denied the SEC's request for disgorgement and interest.
Key Takeaways
- Ripple was ordered to pay a $125 million fine to settle the SEC's legal lawsuit against the company.
- The court rejected the SEC's request for Ripple to return profits, citing a lack of proven investor harm.
The long-running legal battle between the US Securities and Exchange Commission (SEC) and Ripple Labs is approaching closure following a final judgment ordering Ripple to pay a $125 million civil penalty to resolve charges over the institutional sales of XRP token, its native token.
According to a court order dated August 7, Judge Analisa Torres, who has overseen the case over the past three years, determined that Ripple was fined $125 million for conducting sales of XRP to institutional investors without registering it as a security.
The order follows a court verdict last year when Judge Torres ruled that Ripple’s institutional sales of XRP constituted unregistered securities offerings under the Howey test.
While finding Ripple liable for institutional sales, Judge Torres also reiterated that the company’s programmatic sales of XRP to retail clients through exchanges did not violate federal securities laws.
The ruling includes an injunction preventing Ripple from conducting further unregistered offerings of XRP to institutional investors.
Reduced penalty
The resulting penalty, while higher than Ripple’s proposed $10 million, is significantly less than the nearly $2 billion the SEC initially sought, which included extensive disgorgement and prejudgment interest.
As noted in the order, the court denied the SEC’s request to disgorge Ripple’s profits from institutional sales, citing that the SEC’s evidence of pecuniary harm, a necessary condition for disgorgement, was speculative and insufficient to prove actual financial loss.
In addition, the court found the comparison to the Ahmed case, which the SEC brought in to support its claims against Ripple, inapplicable as it involved clear misappropriation and economic loss, which was not demonstrated in Ripple’s case.
“A victory”
Ripple CEO Brad Garlinghouse celebrated the ruling as a victory for the company and the crypto industry.
“The SEC asked for $2B, and the Court reduced their demand by ~94% recognizing that they had overplayed their hand. We respect the Court’s decision and have clarity to continue growing our company,” Garlinghouse said in a recent statement.
“This is a victory for Ripple, the industry and the rule of law. The SEC’s headwinds against the whole of the XRP community are gone,” he added.
Bloomberg ETF analyst James Seyffart and FOX Business journalist Eleanor Terrett also expressed relief and optimism that the case is now over.
I'm sure the SEC will refer to this as a win for getting a $125 million penalty.
But that's really a win for Ripple as far as i'm concerned. And an L for the SEC's "regulation via enforcement" stance https://t.co/LpHI0OU5KO
— James Seyffart (@JSeyff) August 7, 2024
The story of the @SECGov vs. @Ripple case is the one that got me into #crypto reporting 3 years ago.
Now it’s over.
Here’s the piece that started it all:
Regulatory riddle: An investigation into the SEC v. Ripple case and its consequences for cryptohttps://t.co/lEkiiYMY0c
— Eleanor Terrett (@EleanorTerrett) August 7, 2024
Following the court order, XRP jumped 25% to $0.63 before settling at around $0.60, TradingView’s data shows.
