The company expects to reduce the payout to $10 million

Ripple has challenged a $2 billion fine in an SEC lawsuit for selling XRP tokens

14.06.2024 - 12:25

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3 min

What’s new? Lawyers for the fintech company Ripple, which developed the payment protocol of the same name and the XRP token, have challenged the $2 billion fine demanded by the US Securities and Exchange Commission (SEC). They hope to reduce the payout in the litigation by relying on another case: the SEC’s settlement agreement with Terraform Labs (TFL) in a fraud lawsuit that will see the company pay a $4,5 billion fine.

Material by The Block

What else is known? Ripple has been in a legal battle with the SEC since late 2021, which accused the company of violating securities laws when selling XRP tokens and raising $1,3 billion through these transactions. Last year, the court ruled that only direct institutional sales of the asset, but not sales to retail investors through digital exchanges, could be considered a violation.

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Ripple believes that the size of the SEC’s proposed fine for violations in institutional sales is unreasonable, and insists that the amount be reduced to $10 million. The lawyers noted that the SEC typically imposes fines in its civil actions in the range of 0,6-1,8% of the defendant’s gross revenue, but in Ripple’s case, the requested amount exceeds this range.

In addition, the lawyers emphasized that institutional buyers did not suffer significant losses, and Ripple itself was not charged with fraud. In turn, in the TFL case, the jury found the company and its founder Do Kwon guilty of fraud.

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In May 2022, the TFL-developed UST stablecoin and LUNA token depreciated dramatically, causing tens of billions of dollars in losses to investors around the world. Lawsuits alleging fraud against TFL were filed by investors and regulators from several countries, including the United States, Korea, and Singapore.

Kwon has been on the run for about 10 months. After this, he was detained with a fake passport in Montenegro, received four months in prison, and is now awaiting extradition to the US or South Korea, of which he is a citizen.

TFL will pay $3,6 billion in restitution, $420 million in fines, and $467 million in penalties as part of the settlement agreement with the regulator. Kwon will pay $110 million in damages, fines, and penalties of $80 million and $14,3 million, respectively.

In late May, analysts detected activity in the crypto wallets of the TFL-affiliated NPO.

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