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A recent filing in the US District Court for the Southern District of New York shows that Ripple's legal team has filed a notice of supplemental authority, alleging the “unreasonableness” of the civil penalty sought by the SEC.
The presentation took place on June 13, the same day that Terraform Labs settled a lawsuit with the SEC for $4.47 billion. Ripple's lawyers have asked the court to consider an “appropriate” civil penalty, given the precedent shown in the Terraform Labs settlement. Ripple defense attorney James Filan shared a PDF copy of the presentation in X.
The SEC had requested that Ripple pay approximately $2 billion in disgorgement, prejudgment interest, and civil penalties. In response, the blockchain company has advocated for a penalty limit of no more than $10 million. Ripple's lawyers have made similar arguments regarding the sanctions imposed in the respective SEC cases against one block, Telegram and Genesis Global Capital. In particular, this line of argument falls under suspicion because Ripple's filing removed critical information that should provide context for the judgment based on the company's revenue figures.
“As Ripple's opposition explained, in comparable cases (and even more egregious cases), the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant's gross receipts,” the lawyers for Ripple stated. Ripple at the presentation.
Ripple's legal representatives also argue that Terraform “fits the mold” and that the SEC is instead seeking a civil penalty that exceeds the range based on Terraform's agreement, despite the lack of fraud allegations for its part.
“Terraform thus confirms that the Court should reject the SEC's unprecedented and disproportionate request and that an appropriate civil penalty would be no more than $10 million,” the lawyers said.
The SEC's case against Ripple began in December 2020, when the regulator alleged that the blockchain company used its XRP token as an unregistered security to raise funds. The case has become one of the crypto industry's longest legal battles, creating a major legal precedent in July 2023 when Judge Analisa Torres ruled that the XRP token was not a security with respect to programmatic sales on exchanges.
In October 2023, the SEC decided to dismiss its case against Ripple CEO Brad Garlinghouse and CEO Chris Larsen, stating that it planned to discuss solutions with the blockchain company. Judge Torres after rejected the SEC's motion.
Although Judge Torres had initially scheduled the trial between Ripple and the SEC to begin in April, she postponed the proceedings to October 2023 without a designated date for its resumption. At the time of this publication, it is still unclear when the judge might set a new trial date.
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