In the ongoing legal battle between Ripple Labs Inc. and the US Securities and Exchange Commission (SEC), the fintech company sent an important notice of additional jurisdiction to the Southern District of New York. This latest filing, dated June 13, 2024, is intended to remove a judicial opinion regarding the SEC’s pending motion for relief and the filing of a final judgment.
Ripple vs. Renewal of the SEC Court
Highlighting a similar SEC case against Terraform Labs, Ripple’s legal representatives presented a comparative analysis, arguing for equal treatment in their case. The filing expertly points out the SEC vs. Terraform Labs Pte. Ltd., where Terraform and its CEO Do Hyeong Kwon were found guilty of running “one of the largest securities frauds in US history,” as described by the SEC.
In that case, the court approved a final consent decree on June 12, 2024, which resulted in Terraform Labs being ordered to pay approximately $3.59 billion in disgorgement and a civil penalty of $420 million, corresponding to approximately 1.27% of Terraform’s net sales. $33 billion. Ripple’s notice, written by Michael K. Kellogg of Kellogg, Hansen, Todd, Figel & Frederick, PLLC, uses this result to challenge the reasonableness of the SEC’s demands.
A document filed by Ripple’s attorney contrasts the SEC’s treatment of the Terraform case with its approach to the company, highlighting the stark difference in penalties related to the severity of the allegations. The lawyers pointed out that unlike Terraform, which was involved in several fraudulent activities that resulted in huge losses for investors, Ripple’s case does not involve allegations of fraud.
In addition, they argue that the fines sought by the SEC are disproportionately high, explaining that fines in similar cases in the past ranged from only 0.6% to 1.8% of the defendant’s income. The submission includes the following statement to emphasize this distinction: “The civil penalty sought by the SEC against Terraform demonstrates the unreasonableness of the civil penalty sought by the SEC in this case.”
In addition, Ripple’s legal team asserts that such a disproportionate punishment is not only unprecedented but also unfair, given the absence of direct financial damage to institutional buyers that is usually associated with cases of this type.
Drawing parallels to the Terraform case, Ripple’s legal strategy is intended to demonstrate what it sees as inconsistencies in the SEC’s enforcement of fines. This strategy not only questions the fairness of the SEC’s actions but also seeks to establish a basis for negotiating a reasonable sentence.
Ripple’s counsel opposes a civil penalty of $10 million, much lower than the SEC’s proposed fine of $2 billion for selling XRP to institutional investors.
At press time, XRP traded at $0.47967.
The featured image was created with DALL·E, a chart from TradingView.com
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