The U.S. Securities and Exchange Commission says that the penalty that Ripple is willing to pay after a long drawn out legal battle would be a “slap on the wrist that neither punishes nor deters” wrongdoing.
The regulator argued in a Tuesday filing that its initial $2 billion demand would be more appropriate than the nearly $10 million fine Ripple proposed last month.
The SEC said that Ripple’s offer would not deter other cryptocurrency businesses from violating Section 5 of the Securities Act, which requires issuers to file a registration statement when publicly offering securities.
“Given the nearly $1 billion Ripple gained violating Section 5 [and] the multi-billion-dollar business it built selling XRP—accounting for the value of Ripple’s massive XRP holdings and its cash on hand—the ‘low’ penalty Ripple demands would be a ‘slap on the wrist’ that neither punishes nor deters,” the filing said.
“To the contrary, it would encourage other crypto asset issuers to violate Section 5 by making it a remarkably lucrative endeavor, and thus deprive investors the disclosures Congress mandates, as a mere ‘cost of doing business,’” it continued.
Ripple’s chief legal officer Stuart Alderoty on Tuesday slammed the regulator in a post on Twitter. “More of the same from the SEC—failing to faithfully apply the law and trying to pull the wool over the Judge’s eyes,” he wrote.
Ripple—whose founders were behind the seventh biggest cryptocurrency XRP—has been locked in a legal battle with the SEC for years. Back in 2020, the regulator hit the fintech company with a $1.3 billion lawsuit, alleging that it sold unregistered securities in the form of XRP.
But last year, Ripple scored a partial court win against the SEC when a judge ruled that programmatic sales of XRP to retail investors did not qualify as securities.
The ruling sent shockwaves through the industry—particularly as Wall Street’s biggest regulator faces ongoing criticism from politicians and the crypto industry for cracking down unfairly on the digital asset industry.
However, the judge also said that $728 million worth of contracts for institutional sales did constitute unregistered securities sales.
The SEC is seeking a $2 billion fine for that violation as a result.
Edited by Ryan Ozawa.
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