What's Next in the SEC vs. Ripple Case?
Date: 2024-08-16 Author: Oliver Abernathy Categories: BUSINESS
A federal judge ruled last week that Ripple must pay $125 million in fines after it was found to have violated federal securities laws when selling XRP to institutional clients last year. That's far less than the $2 billion the U.S. Securities and Exchange Commission (SEC) was seeking, and for now, the ruling appears to bring an end to the long-running case that began in December 2020.
Closing the Case
The story behind this case began in late 2020, when the SEC filed a lawsuit against Ripple, alleging that the company was selling XRP in violation of securities laws. The case languished in the Southern District of New York for several years until Judge Analisa Torres ruled in July 2023 that Ripple had indeed violated federal laws when it sold XRP directly to institutional investors. However, it had not violated federal laws when it sold the tokens on exchanges where they were made available to retail customers. The SEC tried to appeal parts of that ruling, but to no avail, and in October it dropped charges against Ripple CEO Brad Garlinghouse and Chairman Chris Larsen. Last week, a judge ordered Ripple to pay a fine and barred it from violating the law in the future.
While it may seem like both sides could count the ruling as a partial victory, Ripple clearly won. The $125 million fine is significantly higher than the $10 million the company had originally offered, but it’s a fraction of the nearly $2 billion the SEC was seeking.
The SEC, however, claimed success, noting the significant civil penalties, which were “12 times the amount Ripple proposed.” In its statement, the SEC emphasized that the court confirmed the seriousness of Ripple’s violations, pointing to their “willingness to push the envelope.”
The SEC did not say whether it plans to appeal the July 2023 ruling.
Stuart Alderothy, Ripple’s general counsel, noted that the ruling not only brings closure to the case, but also confirms that the judge dismissed the SEC’s claims as excessive. He emphasized that no allegations of fraud, market manipulation, or misappropriation were made, and no one was harmed.
Patrick Dougherty, head of the digital assets practice at Foley & Lardner, said that the ruling on secondary sales of XRP, which is favorable to Ripple, is the most significant in the case. He believes it is a defeat for the SEC that could weaken its position in other cases where tokens are traded on exchanges. Another attorney, who asked to remain anonymous, suggested that the SEC may try to appeal this part of the decision, calling it a “significant defeat” for the regulator.
