SEC Wants More Punishment For Ripple Than A ‘Slap On The Wrist’

SEC Wants More Punishment For Ripple Than A ‘Slap On The Wrist’

According to the US Securities and Exchange Commission (SEC), the penalty that Ripple is prepared to pay after their long drawn out legal battle is not appropriate.

The regulator has asserted that it would merely be a ‘slap on the wrist’ that would neither deter nor punish wrongdoing.

The argument

In a filing last week, the SEC said that their demand for a fine of $2 billion would be more appropriate than the figure of $10 million that had been proposed by Ripple back in April.

The securities regulator asserted that such a fine would not deter other crypto firms from violating Section 5 of the Securities Act.

As per the rules, issuers are required to file a registration statement before they can begin offering securities publicly.

The filing stated that violating Section 5 of the Securities Act had allowed Ripple to gain $1 billion. Plus, it had also established a multi-billion-dollar business via sales of the XRP token.

Moreover, Ripple also has a massive amount of cash in hand. Its XRP holdings also carry a high value. Therefore, the ‘low’ penalty that Ripple has proposed would only be a ‘slap on the wrist’.

The response

The SEC went on to assert that other crypto asset issuers would be encouraged to violate the Securities Act similarly because it would be very lucrative.

Thus, it would mean that disclosures that are mandated by Congress would not be made to investors and would be considered a ‘cost of doing business’.

Stuart Alderoty, the chief legal officer at Ripple, criticized the securities regulator for their demands in a post on X.

He said that the SEC was doing the same thing repeatedly and not applying the law and was trying to fool everyone.

The background

The SEC and the Ripple have been embroiled in a legal battle for years. The company is behind XRP, the seventh biggest cryptocurrency in the market.

The regulator filed a lawsuit worth $1.3 billion against the fintech company back in 2020 for selling unregistered securities in the form of the XRP token.

However, last year saw Ripple score a partial win against the agency. A judge ruled that programmatic sales of the token to retail investors could not be classified as securities.

The ruling took the entire crypto industry by storm, especially because the biggest regulator on Wall Street is facing ongoing criticism for its crackdown on the digital asset industry.

As a matter of fact, many politicians and crypto industry participants have called the actions of the SEC as unfair.

But, it should be noted that the judge added that sales worth $728 million made to institutional investors did constitute as unregistered securities sales.

Therefore, the SEC is seeking a fine for that violation and has demanded that Ripple pay $2 billion to the regulator.

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