On August 7, SDNY Judge Analisa Torres ordered Ripple Labs Inc. (“Ripple”) to pay $125 million and enjoined Ripple from future violations of securities laws. This high-profile ruling addressed the SEC’s motion for remedies and entry of judgment on Ripple’s Section 5 violations, stemming from the 2020 lawsuit regarding unregistered sales of Ripple’s XRP token. In 2023, Judge Torres found that the token only qualified as a security when sold to institutional investors, a significant ruling in applying securities laws to digital assets. In this week’s ruling, the Court reinforced the gravity of the violation while still noting that there were no allegations of intentional wrongdoing or fraud by Ripple.
The civil penalty falls far short of the $2 billion penalty requested by the SEC. The SEC’s request for disgorgement was also denied, as the Court found that institutional investors did not suffer direct monetary harm as a result of the unregistered sales relying on the Supreme Court’s decision in Liu v. SEC and the Second Circuit’s decision in SEC v. Govil clarifying the meaning of “victims.”[1] The penalty does exceed the $10 million fine requested by Ripple; however, Judge Torres noted that “there is no question that [Ripple’s] recurrent, highly lucrative violation of Section 5 is a serious offense.” Further, the Court issued a permanent injunction on the basis that Ripple’s “willingness to push the boundaries” of the Court’s previous Order demonstrated a reasonable probability of future violations. Still, Ripple has characterized the ruling as a victory.
To read more: https://www.law360.com/capitalmarkets/articles/1867540/ripple-ordered-to-pay-125m-penalty-in-sec-case
To read our analysis of the 2023 Order: https://www.pastore.net/s-d-n-y-issues-ruling-regarding-cryptocurrency-regulation-the-ripple-effect/
[1] Liu v. SEC, 591 U.S. 71 (2020); SEC v. Govil, 86 F.4th 89 (2d Cir. 2023).