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The U.S. Securities and Exchange Commission (SEC) has filed its opening remedies brief in the public docket today, seeking Ripple to pay $2 billion for violations of securities laws.
The regulator first filed the brief under seal on March 22. However, the motion was sealed for nearly four days as the parties deliberated on the necessary redactions.
The latest development was shared by seasoned crypto lawyer James K. Filan in a tweet today.
#XRPCommunity #SECGov v. #Ripple #XRP The @SECGov has filed its Motion for Remedies and Entry of Final Judgment, its Memorandum of Law in Support of that Motion, and its "Proposed" Judgment.https://t.co/uPlpJ7Tmon
— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) March 26, 2024
SEC’s Proposed Final Judgment
According to the public version of the brief, the SEC asked the court to impose a permanent injunction against Ripple’s XRP institutional sales to curtail the company from violating securities laws in the future.
The commission also wants the court to impose a fine against Ripple of nearly $2 billion for violating federal securities laws.
In particular, the SEC wants Ripple to pay $876,308,712 ($876.3 million) in disgorgement, $198,150,940 ($198.15 million) in prejudgment interest, and another $876,308,712 (876.3 million) in civil penalty, bringing the total to $1.95 billion.
It is worth noting that the fines and penalties the SEC seeks are above the $729 million that Ripple raised by selling XRP to institutional investors from 2013 through 2020, when the lawsuit was filed.
According to the SEC, Ripple increased its XRP sales after the lawsuit was filed in 2020. It added that the crypto payments company also sold billions of dollars’ worth of XRP since the court issued the summary judgment in July 2023.
Notably, the public version did not specifically state the monetary value of Ripple’s post-complaint sales. The information was redacted as agreed by the parties.
SEC Cites 3 Reasons Why Ripple Should Pay $2B in Fine
Meanwhile, the commission highlighted three reasons why Ripple should pay up to $2 billion in penalties.
First, the SEC mentioned that the fine would serve as a deterrent to Ripple, given the enormous amount of unregistered XRP sales it conducted over the past three years.
Second, the SEC claims that the crypto payments company has refused to accept responsibility for violating the law for nearly a decade. It alleged Ripple of mischaracterizing the summary judgment issued in July by describing the decision as a total victory for the company.
Furthermore, the commission accused Ripple of failing to correct course, adding that the company has also provided less information about its XRP sales since the summary judgment.
Third, the SEC argued that Ripple ignored the advice of a reputable law firm, which warned the crypto payments company against selling XRP for cash and promoting the coin as an investment.
Consequently, the SEC recommended that Ripple will only correct its conduct if the court levies a significant sanction against the company and has it return all ill-gotten gains from its past institutional XRP sales.
Ripple CEO Reacts
Reacting, Ripple CEO Brad Garlinghouse accused the commission, under the leadership of Gary Gensler, of consistently acting outside the law, a move that has attracted multiple criticisms from federal judges.
Gensler’s SEC has repeatedly acted outside the law – not going unnoticed by Judges admonishing the agency for a "gross abuse of the power entrusted to it by Congress" (DEBT Box case) and for acting without "faithful allegiance to the law" (Ripple case). Let’s not also forget… https://t.co/vay6WDBfJc
— Brad Garlinghouse (@bgarlinghouse) March 25, 2024
For instance, Garlinghouse mentioned how a federal judge called out the SEC in its case against DEBT Box for gross abuse of power entrusted by Congress. He also noted that one of the judges in the ongoing Ripple lawsuit also criticized the SEC for lacking faithful allegiance to the law.
The Ripple CEO faulted the SEC’s plan to demand $2 billion as penalties in a case that does not involve any allegation of fraud or recklessness.
Interestingly, Garlinghouse assured the XRP community that the company would expose the SEC’s true nature when it responds to the brief.
Ripple is expected to file its reply to the SEC’s opening remedies brief no later than April 22. As reported earlier, Ripple’s reply will be submitted under seal by April 22, and a public version is expected to be filed by April 24.