Ripple Cites Terra Agreement on Appeal to Reduce Its Fine from $2 Billion to $10 Million

In summary

Ripple Labs argued that the Terraform Labs settlement justifies reducing its proposed fine to $10 million.
The SEC initially proposed a $2 billion fine against Ripple Labs, which included restitution and interest.
XRP has fallen from the top three largest cryptocurrencies to eighth position in market capitalization.

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The accounts are not adding up, says Ripple Labs.

The company behind the XRP token argued in a letter filed in its court battle with the Securities and Exchange Commission that Terraform Labs’ recent $4.5 billion settlement is evidence that its proposed fine should be reduced to $10 million.

Earlier this year, the SEC proposed that Ripple Labs, the company behind XRP, pay a $2 billion civil penalty. That would include $876 million in restitution, $198 million in prejudgment interest and an additional civil penalty of $876 million, according to court documents.

Now, Ripple said in its letter, it has new evidence to argue for a lower fine.

In the Terraform Labs case, the alleged $40 billion loss to investors led to $3.6 billion in restitution and $420 million in civil penalties, for a settlement totaling just over $4 billion.

“This civil penalty represents approximately 1.27% of Defendants’ $33 billion in gross sales,” Ripple wrote in its letter. Adding later that in other cases “the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant’s gross profits.”

But in the Ripple case, the “SEC seeks a civil penalty that far exceeds that range, even though there are no allegations of fraud in this case and institutional buyers did not suffer substantial losses,” the company’s lawyers wrote in their letter.

When the Terraform Labs deal was announced on Wednesday, Stephen Alderoty, Ripple’s chief legal officer, said the SEC has been obsessed with getting publicity for its efforts.

“This SEC is again bragging about a big fine, but in reality the SEC will end up being a creditor in bankruptcy court (see BlockFi),” he wrote on Twitter. “The SEC has become a spectacle regulator chasing headlines instead of good policy.”

The lawsuit against Ripple has been ongoing since late 2020, when the SEC sued Ripple Labs and co-founders Christian Larsen and CEO Brad Garlinghouse alleging that XRP is an unregistered security.

At the time, XRP was the third-largest cryptocurrency behind Bitcoin and Ethereum, with a market capitalization of $20.7 billion.

Since then, its market capitalization has grown to $26 billion, but that hasn’t been enough to prevent other assets from displacing it from the top three. It is now the eighth largest asset, with Tether, BNB, Solana, Lido Staked Ether and USDC surpassing it in market capitalization.