SEC Asks Court to Impose Significant Penalties on Ripple

In a Motion for Remedies, the SEC argued that crypto exchange Ripple should pay more than $2 billion in penalties for selling its token, XRP, to institutional investors.

The SEC sued Ripple in 2020, asserting that the crypto firm engaged in unregistered distribution of securities. U.S. District Court Judge Analisa Torres disagreed, in part, ruling in July that XRP is a security only when it’s sold to institutional investors, not to the general public. (See related coverage.) Judge Torres further ruled in October that the SEC could not appeal her decision, and the SEC asked the Court to dismiss the case against Ripple executives. (See related coverage.)

In a Motion for Remedies, the SEC argued that the crypto company "has not accepted responsibility for its violations," and has ignored legal advice suggesting it should refrain from promoting XRP as an investment. The SEC said, "[Ripple] opted for the money it gained by promoting an investment it sold for cash, while acting with the apparent fear that the disclosure of its finances and business activities required by law of those who sell securities would interfere with its profitable plan." The SEC said, "[o]nly a significant sanction from this court and the return of the ill-gotten gains Ripple made from its violations will cause Ripple to correct its conduct, either by registering its securities sales and making the disclosures required, or not selling securities."

The SEC asked the Court to (i) permanently enjoin Ripple from future violations of Securities Act Section 5 ("Prohibitions relating to interstate commerce and the mails") and from conducting an unregistered offering of XRP in Institutional Sales, (ii) order Ripple to pay $876,308,712 in disgorgement and $198,150,940 in prejudgment interest, (iii) order Ripple to pay an $876,308,712 civil penalty. The SEC also asked the Court to "consider how easily actors, particularly in the crypto asset space, can today engage in the same sort of conduct as Ripple’s and send a strong message that such abuses will not be tolerated."

Ripple CEO Brad Garlinghouse said in a post on X, "There is absolutely no precedent for this," noting that there were no findings of fraud or recklessness in the case. "We will continue to expose the SEC for what they are when we respond to this," he said.

Ripple's reply is due April 22, 2024.