The U.S. Securities and Exchange Commission (SEC) sued and is seeking fines and penalties totaling $2 billion in its case against Ripple Labs. SEC sued Ripple over unlawful crypto sales of the cryptocurrency XRP, the company’s chief legal officer said in a social media post on Monday.
Ripple Chief Legal Officer Stuart Alderoty said the SEC regulator has asked U.S. District Judge Analisa Torres in Manhattan for the penalties in court papers filed under seal. The SEC was scheduled to file the documents publicly with redactions on Tuesday.
XRP curbed a bulk of its intraday gains after the news, and was last trading up 1.3% at $0.64079.
Biggest fines against crypto firm
The payout, if passed, could be potentially one of the biggest fines slapped against a crypto firm. It comes after Torres ruled in July that Ripple Labs’ sales of XRP worth nearly $730 million to hedge funds and sophisticated investors were unlawful sales of unregistered securities.
Unlawful crypto sales by Ripple
“Rather than faithfully apply the law, the SEC remains bent on wanting to punish and intimidate Ripple – and the industry at large,” Alderoty said.
A spokesperson for the SEC declined to comment.
In July, U.S. District Judge Analisa Torres ruled that the blockchain company’s sale of XRP worth $728.9 million to hedge funds and other sophisticated buyers amounted to unlawful sales of unregistered securities.
Ripple is scheduled to file a reply in April.
SEC sued Ripple
The SEC sued Ripple, its CEO Brad Garlinghouse and co-founder Chris Larsen in 2020, accusing them of illegally raising more than $1.3 billion in an unregistered securities offering by selling XRP.
The SEC dropped its remaining claims against Garlinghouse and Larsen in October.
The case has been highly watched, as it is among the biggest brought by the SEC in the cryptocurrency space.
While the SEC partly won the case, Torres dealt the regulator a high-profile setback when she ruled that XRP Ripple sold on public cryptocurrency exchanges did not meet the legal definition of a security.
Torres denied the SEC’s request to repeal that ruling while the case is in progress. But the regulator may appeal once the judge decides its request for penalties.
Companies facing SEC lawsuits
Other crypto companies facing SEC lawsuits, including major exchanges Coinbase and Binance, have pointed to Torres’ ruling in urging other judges to dismiss the regulator’s claims.
While the SEC has depicted most cryptocurrencies as the same kind of investment that has been classified as securities for decades, the industry has argued securities laws do not fit digital assets and called for new laws and regulations.
Key point of focus for crypto industry
The SEC-Ripple case is a key point of focus for the crypto industry, given that its overall outcome could potentially dictate the nature of crypto tokens and their regulation.
The SEC has long argued that crypto tokens are securities and should be governed under securities law. But crypto proponents have argued that securities laws are incapable of addressing digital assets, and have called for new, dedicated regulation.
Some proponents have also argued that cryptocurrencies are digital commodities and as such, should be governed by the Commodity Futures Trading Commission.
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