Ripple Labs Inc. has been ordered by a federal judge to pay a $125 million civil penalty for improperly selling its XRP token to institutional investors. This penalty is significantly lower than the nearly $2 billion that US regulators had initially sought in their long-running legal battle with cryptocurrency companies.
The Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs in 2020, accusing the company of violating the law by raising funds through the sale of the digital token without registering it as a security. This case has been closely monitored due to its potential impact on the SEC’s authority over cryptocurrency regulation.
Ripple had argued that the penalty should not exceed $10 million. In her ruling on Wednesday, US District Judge Analisa Torres emphasized that the case did not involve any allegations of fraud.
XRP rose as much as 25% to 64 cents after the ruling. Still, the token, which is the seventh-largest cryptocurrency by market value, is little changed this year. The order comes as digital currencies have lost value amid the current bout of risk aversion in global markets.
Read more: SEC Adjusts Complaint Against Binance
Torres found last year that XRP was covered by securities law only when sold to institutional investors, a ruling hailed as a major victory for the industry. The SEC has several major cases against crypto exchanges and issuers, accusing them of offering unregistered securities.
‘Overplayed Their Hand’
Ripple Chief Executive Officer Brad Garlinghouse pointed out in a post on X that the court reduced the SEC’s demand by about 94%, “recognizing that they had overplayed their hand.” He called it a “victory for Ripple, the industry and the rule of law” and said “the SEC’s headwinds against the whole of the XRP community are gone.”
Ripple’s general counsel, Stuart Alderoty, said in a phone interview that the company respects the ruling and can “pay that off our balance sheet with cash,” adding that “we’re glad to have this finally behind us.”
“Hopefully this signals the end of this administration’s war on crypto,” Alderoty said. “We need a better way forward for this industry and this country.”
The SEC didn’t respond to a request for comment on the ruling.
Disgorgement Denied
The judge granted the SEC’s request for an injunction barring Ripple from conducting unregistered offerings of XRP to institutional investors. But she denied the agency’s bid for Ripple to disgorge profits from its sales. The regulator had sought more than $876 million in disgorgement and more than $198 million in interest, along with an $876 million civil penalty.
Torres wrote that the case “does not involve allegations of fraud, misappropriation or other more culpable conduct” and that the SEC hadn’t shown that Ripple’s failure to register the sales with the agency caused investors substantial losses.
The case is SEC v. Ripple Labs Inc., 20-cv-10832, US District Court, Southern District of New York (Manhattan).
Cre: Bloomberg
David Ma was born in 1980 in California, is a Vietnamese American, known as one of the entrepreneurs and investors in the field of cryptocurrency and stock market. In 2006, he graduated from Stanford University with honors and began his career in business.
Email: [email protected]
