A federal judge has ordered Ripple Labs to pay a civil penalty of $125 million for improperly selling its XRP tokens to institutional investors without registering them as securities1. The decision comes after a prolonged legal dispute with the U.S. Securities and Exchange Commission (SEC), which initially sought a much higher penalty of $2 billion.
The court found that Ripple’s actions violated securities law in 1,278 transactions. However, the judge denied the SEC’s request for Ripple to disgorge more than $876 million in profits from XRP sales and pay additional interest and penalties. Instead, the fine represents remittance for the violations.
“We respect the court’s decision and have clarity to continue growing our company,” Ripple CEO Brad Garlinghouse said in a post on X.
The SEC asked for $2B, and the Court reduced their demand by ~94% recognizing that they had overplayed their hand. We respect the Court’s decision and have clarity to continue growing our company.
This is a victory for Ripple, the industry and the rule of law. The SEC’s…
— Brad Garlinghouse (@bgarlinghouse) August 7, 2024
Judge Analisa Torres emphasized that the case did not involve allegations of fraud or misappropriation but focused on the failure to register XRP sales with the SEC. She issued an injunction requiring Ripple to file a registration statement if it intends to sell securities in the future.
Reuters quoted an SEC spokesperson saying in reaction to the ruling.”As court after court has stated, the securities laws apply when firms offer and sell investment contracts, regardless of the technology or labels that they use.”
This legal battle between Ripple and the SEC has spanned over 3½ years. While the SEC’s initial demand was significantly reduced, both parties consider the recent decision a partial victory. Ripple’s CEO, Brad Garlinghouse, commented that the SEC’s overreach was evident, highlighting the substantial reduction in their demand.
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