- Ripple Labs has filed its opposition against the SEC’s motion for remedies in which it challenged the regulator’s overreaching demands
- Ripple insists that its civil penalty should not exceed $10 million and that the SEC has failed to prove that a disgorgement is warranted
FinTech giant Ripple has filed an opposition to the US SEC’s (Security and Exchange Commission’s) motion for remedies and entry of final judgment. In the document dated April 22, Ripple clearly stated that the SEC had failed to prove that any injunction or disgorgement was warranted in the case. The firm also argued that the relevant factors in its case warrant a low penalty not exceeding $10 million.
This filing by Ripple follows the SEC’s motion of remedies against the firm last month, in which the regulator demanded approximately $2 billion in penalties. The remedies were split into a disgorgement, a civil penalty, and a prejudgement interest.
The SEC determined a disgorgement of $876,308,712, which it said was a “reasonable approximation of profits causally connected to the violation.” According to the Commission, this disgorgement will return Ripple to its financial status quo before it allegedly made illegal profits from institutional sales.
However, Ripple’s opposition filing claims the SEC has not yet shown that any disgorgement is warranted. Ripple insists that its institutional sales caused no pecuniary harm to buyers. So, “accordingly, the SEC must show that investors suffered pecuniary harm as a predicate for a disgorgement remedy.”
“After years of investigation and more years of discovery, the SEC does not and can not point to any Institutional Buyer that lost money as a result of purchasing XRP from Ripple. Instead, these buyers received the benefit of th[eir] bargain” argues Ripple.
Ripple’s filing repeatedly cited the case of SEC vs Govil as the foundation for its argument against the unwarranted disgorgement. The SEC accused Aron Govil of fraudulent securities sales via his company Cemtrex and sought $5.8 million disgorgement from him. However, Govil advanced the case to the Second Circuit Court of Appeals which denied the SEC’s demand, ruling that the regulator is not entitled to disgorgement from a seller unless a buyer suffers financial loss.
Ripple also argued that its civil penalty should not exceed $10 million, stating that “the relevant factors counsel a low penalty, not a high one.” The fintech firm determined that its case with the SEC is a “first-tier case” since there were never allegations of fraud, deceit, or manipulation from the Commission. It also highlighted the five factors that courts in the district consider while determining whether civil penalties should be applied and proved how each factor favors a low penalty.
In addition, Ripple compared the $876 million disgorgement imposed by the SEC to other digital asset cases, including Block.one, Genesis Global Capital, and Telegram, finding it inappropriate that it’s asked to pay a civil penalty more than twenty times that of cases involving far more revenue and “actual substantial losses to others.”
“The SEC’s assertion that this case warrants a civil penalty twenty-one times higher thanBlockFi deserves no credence. Taking both discretionary and comparative factors into account, an appropriate civil penalty would be no more than $10 million,” said Ripple
Ripple has also challenged the SEC to justify its call for an injunction by proving that “Ripple will likely violate the law in the future.” According to Ripple, a mere possibility of future violations doesn’t suffice for injunctive relief. Additionally, Ripple argues that its pre-ruling institutional sales “did not show reckless disregard of the law.”