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SEC demands $2 billion from Ripple Labs for crypto token sale
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The US Securities and Exchange Commission has sought $2 billion in fines from Ripple Labs after a US federal court found that the cryptocurrency group had violated securities laws by improperly selling some tokens to investors.
The request is the latest salvo in a legal battle that began when the regulator sued Ripple in 2020, claiming it sold $1.38 billion worth of its XRP token without filing registrations required by U.S. securities laws. Under Gary Gensler, the SEC has taken an aggressive approach to cryptocurrencies, an industry it has called a “Wild West.”
Gensler argued that many crypto tokens qualify as securities and fall within his agency’s purview. The SEC’s case against Ripple was biased fired last July, when U.S. District Judge Analisa Torres found that registration requirements did not apply to approximately $757 million worth of XRP tokens sold on digital asset exchanges, because retail investors did not purchase XRP with any reasonable expectation of profit from Ripple’s trading activities.
But the judge ruled that the tokens sold to institutional investors were securities. The SEC on Tuesday sought $2 billion in penalties and remediation for those sales, according to a request filed Monday in the Southern District Court of New York.
“Further evidence shows egregious misconduct by Ripple, highlighting the importance of this provision as a deterrent and to ensuring that Ripple ceases its illegal conduct,” the SEC said in a court filing, alleging that the company has made billions of Most or all of XRP sales after Torres’ ruling appeared “similar to institutional sales.”
Stuart Alderoty, Ripple’s chief legal officer, said the SEC “trades in false, mischaracterized, and designed to mislead statements. They stayed true to form here,” he writes in a post on X.
“Rather than faithfully enforce the law, the SEC continues to seek to punish and intimidate Ripple – and the industry at large,” he added, saying the company will file its response next month.
The SEC declined to comment on Alderoty’s statements.
Last year’s ruling in the Ripple case represented a setback in the agency’s efforts to limit unregistered sales of digital assets. The case is based on a legal clause that prohibits the sale of “investment contracts” unless they are registered as securities with federal regulators.
The SEC has filed a series of cases under this theory, accusing Genesis, BlockFi and others to sell cryptocurrencies without registering them as securities offerings. The two companies reached multimillion-dollar settlements with the agency.