[NEWS] Ripple criticizes SEC in legal battle over cryptocurrency lawsuit fines

The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has come to a head.

The case is about the classification of Ripple's native crypto asset, XRP, and the appropriate penalties for allegedly issuing unregistered securities.

Ripple CEO Stuart Alderoty has been hostile towards the SEC, igniting the penalty debate and casting doubt on the outcome of the case.

The SEC initially sought a huge fine of $2 billion from Ripple, an amount that shocked the crypto industry. Ripple argued that the fine was excessive.

Ripple vigorously contested this astronomical amount, arguing that XRP should not be subject to such regulation because the courts had determined that it is not a security in the first place.

After further negotiations, the SEC lowered the fine to $102.6 million, but it remains a large amount.

In a post on X, Aldeloti said,

"@SEC is furious. Ripple defended itself by saying they did nothing wrong. The court made it clear that XRP is not a security, so there are no victims to compensate. The worst thing for @SEC is that Ripple is thriving. But at least @SEC seems to have abandoned their absurd demand for $2 billion."

Aldeloti called the SEC's strategy "furious" and emphasized that Ripple has not harmed investors.

He also emphasized that there is no suspicion of fraud in Ripple's case, contrasting it with the settlement with TerraForm Labs, where the SEC set aside $4.47 billion despite the company's bankruptcy.

TerraForm Labs' fraud is the standard

The SEC calculates that TerraForm Labs' profits from its fraudulent activities are $3.587 billion, and argues that the $420 million civil penalty against the company represents 11.7% of the profits.

Based on this, the SEC is seeking the return of $876.3 million in ill-gotten profits from Ripple, so 11.7% of this amount would be a fine of $102.6 million. This is much larger than the $10 million claimed by Ripple.

The SEC argued in court that the fine was less than $10 million. Ripple said it "avoided comparing the civil penalty to the gross profits of the violations" in the Terraform Labs-SEC settlement.

The court's decision on the appropriate fine will be a landmark case for the burgeoning cryptocurrency industry. A huge fine against Ripple could set a precedent for the SEC's strict regulation of cryptocurrencies that are considered unregistered securities.

This could stifle innovation and become an obstacle to the growth of the cryptocurrency market. On the other hand, a lighter penalty could be interpreted as a weakening of the SEC's enforcement power, which could lead to a lawless cryptocurrency industry.

Aldeloti may have used the word "infuriated" as a bargaining chip to get the SEC to accept a lower settlement than Ripple's proposed $10 million.

Alternatively, Ripple could signal its determination to fight the case all the way to trial, leading to a drawn-out legal battle that could still take years to resolve.

The drastic reduction in the proposed penalty from $2 billion to $102.6 million suggests there is some room for compromise. The court is expected to ultimately impose a mid-level amount and may even require both sides to make concessions.