The US Securities and Exchange Commission (SEC) has detailed the rationale behind its insistence that crypto company Ripple should be fined roughly $2 billion in a March 25 court filing.
Ripple’s top brass, including CEO Brad Garlinghouse and CLO Stuart Alderoty, had previously hinted at the SEC’s forthcoming move. They said that redacted versions of the court documents would be released to the public by March 26.
Today, the SEC’s proposal was unveiled, laying out its request for Ripple Labs to pay $876 million in disgorgement, $198 million in prejudgment interest, and a $876 million civil penalty. The total sum amounts to $1.95 billion.
Why SEC wants Ripple fined $2 billion
The SEC proposed a massive fine against Ripple because of the substantial volume of unregistered XRP sales over the past three years. According to the regulator, this move is necessary to deter similar actions across the broader crypto industry.
In addition, the Gary Gensler-led Commission alleged that Ripple has failed to acknowledge its violations of securities laws. The commission criticized Ripple for misrepresenting a prior court ruling on XRP as a complete victory and continuing to deflect responsibility.
The SEC noted that Ripple has not taken adequate steps to rectify its behavior, such as providing withheld information to past institutional investors. Instead, Ripple has reduced transparency regarding its XRP sales while blaming the SEC for its actions.
Moreover, the SEC accused Ripple of deliberately circumventing the law. The regulator pointed out that an unnamed law firm had advised the crypto company against selling XRP for cash or promoting it as an investment.
Consequently, the SEC emphasized the need for a significant penalty to prompt Ripple to rectify its actions by registering securities sales and necessary disclosures or refraining from selling securities altogether.
It added:
“The SEC asks the Court to consider how easily actors, particularly in the crypto asset space, can today engage in the same sort of conduct as Ripple’s and send a strong message that such abuses will not be tolerated.”
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