The company Ripple, which is in the sights of the American stock market watchdog for its crypto XRP, believes that the fine demanded from it by the SEC is totally “disproportionate”.

Ripple wants to drastically lower the amount of the fine hanging over its head. In a press release published by the company’s lawyers on June 13, Ripple estimates that it should not pay more than $10 million in fines, compared to the $2 billion demanded by the SEC.

The financial sanctions demanded by the American stock market watchdog (the Securities and Exchange Commission or SEC) are “unreasonable”, judges thus Ripple.

Since December 2020, a long-term legal battle has opposed the crypto company Ripple and the SEC. The American stock market watchdog has taken Ripple, the originator of the XRP crypto tokens, to court for offering unregistered financial securities. The SEC considers that Ripple sold $1.3 billion of XRP to investors without having registered this cryptocurrency as a security or financial security.

In July 2023, Ripple obtained a partial victory, with American justice ruling that the XRP cryptocurrency was in fact not a financial security. It therefore did not require registration with the SEC.

A nuance of size

However, there was a major nuance in this decision. If the XRP token was not considered a financial security for individuals, it had indeed been qualified as a security for institutional investors, therefore falling under the scope of SEC regulations for a portion of the tokens issued. This is the case for $728.9 million worth of XRP sold by Ripple to investment funds and other institutional investors.

It is for this reason that the SEC is demanding a fine for the XRP sold to these institutions. In March 2024, the SEC demanded fines and penalties amounting to $2 billion against Ripple.

And so, on June 13, Ripple’s lawyers strongly contested the amount of the fine. For this, the lawyers refer to another legal case: that between the SEC and Terraform and its founder Do Kwon.

A US jury concluded that Do Kwon misled investors into believing in the reliability of his crypto company. In the spring of 2022, the luna cryptocurrency and the UST stablecoin of this Terraform Labs ecosystem collapsed in a few days, causing investors to lose more than $40 billion. On June 12, Terraform Labs entered into a civil settlement with the SEC. Terraform Labs and its founder thus agreed to pay a total amount of $4.55 billion (including $420 million in civil fines).

Terraform is, however, in the process of being liquidated and it is unlikely that the American authorities will recover all of these fines and penalties.

A “disproportionate” fine

Regardless, in this agreement, the $420 million civil fine represents “approximately 1.27% of Terraform’s $33 billion” in revenue (generated since its inception), Ripple’s lawyers argue . And in cases comparable to that between Ripple and the SEC, the stock market watchdog “had accepted civil penalties ranging from 0.6% to 1.8% of the gross revenues” of the companies concerned, they continue.

The agreement in the Terraform case “thus confirms that the Court should reject the SEC’s disproportionate and unprecedented request and that an appropriate civil penalty would not exceed $10 million” for Ripple, the lawyers continue.

Stuart Alderoty, legal director of Ripple, also declared on X (formerly Twitter) on June 15 that “the SEC was angry”. “Ripple has defended itself and is not accepting anything.” There are no “victims” to be compensated. And even worse for the SEC, Ripple “is booming.”

Sébastien Bordry with Jean-Louis Dell’Oro


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