Ripple Cites Terra Settlement in Appeal to Cut Penalty From $2 Billion to $10 Million

The math ain't mathing, says Ripple Labs.

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

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

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

Terraform Labs to Dissolve After $4.5 Billion SEC Settlement Over LUNA, UST

Terraform Labs CEO Chris Amani disclosed Wednesday that the firm behind the $40 billion collapse of LUNA and UST in 2022 is dissolving following a $4.5 billion settlement agreement with the U.S. Securities and Exchange Commission. “[Terraform Labs] always intended to dissolve at some point, and that point is now,” Amani wrote on Twitter (aka X) “We will be winding down operations completely.” The company and its former CEO, Do Kwon, agreed to cough up billions of dollars Wednesday, according to...

In the Terraform Labs case, the alleged $40 billion investor loss led to a $3.6 billion disgorgement and $420 million in civil penalties for a total of settlement of just over $4 billion.

"This civil penalty represents approximately 1.27% of defendants' $33 billion 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 revenues."

But in the Ripple case, the "SEC seeks a civil penalty far exceeding 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 settlement was announced on Wednesday, Stephen Alderoty, Ripple's chief legal officer, said the SEC has been preoccupied with getting press for its efforts.

"This SEC is again touting a big penalty—but the SEC actually will end up a creditor in bankruptcy court (see BlockFi)," he wrote on Twitter. "The SEC has become a show regulator chasing headlines rather than 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 $20.7 billion market capitalization.

Since then, its market cap has grown to $26 billion—but that's not been enough to stop other assets kicking out out of the top three. It's now the eighth-largest asset, with Tether, BNB, Solana, Lido Staked Ether, and USDC moving between it and the top two.