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Ripple Faces SEC Pushback Over “Slap on the Wrist” Fine
The U.S. Securities and Exchange Commission has raised concerns regarding Ripple’s proposed penalty following a lengthy legal battle, deeming it insufficient to deter wrongdoing. In a recent filing, the regulator argued that the initial $2 billion demand would be more fitting than the meager $10 million fine suggested by Ripple last month.
The SEC contends that Ripple’s offer fails to effectively discourage other cryptocurrency firms from violating Section 5 of the Securities Act, which mandates issuers to file a registration statement for public securities offerings. The lucrative gains Ripple amassed from flouting Section 5, amounting to nearly $1 billion, coupled with its substantial XRP holdings and cash reserves, render the proposed penalty inadequate.
The regulator emphasizes that a lenient sanction would not only fail to punish Ripple accordingly but also incentivize other crypto asset issuers to skirt regulatory requirements at the expense of investor protection, treating disclosures as merely a “cost of doing business.”
Legal Battle Dynamics
Ripple’s chief legal officer, Stuart Alderoty, expressed dismay at the SEC’s stance, accusing the regulator of misapplying the law and attempting to deceive the court. Despite the ongoing legal feud, Alderoty expressed optimism about nearing a resolution and moving past the protracted lawsuit, acknowledging the challenges many others face in the process.
Ripple, known for its creation of the XRP cryptocurrency, has been embroiled in a legal dispute with the SEC for years. The SEC’s initial lawsuit in 2020 alleged that Ripple engaged in the sale of unregistered securities through XRP, culminating in a $1.3 billion legal battle.
While Ripple managed to secure a partial victory last year when a judge ruled that retail sales of XRP did not constitute securities offerings, institutional sales contracts worth $728 million were deemed violative of securities regulations. Consequently, the SEC is seeking a $2 billion penalty for this violation.
The legal showdown between Ripple and the SEC has reverberated throughout the cryptocurrency industry, highlighting ongoing concerns about regulatory overreach and the need for clarity in defining digital asset securities. As stakeholders continue to navigate the evolving regulatory landscape, the outcome of this high-profile case holds implications for industry participants and observers alike.
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