In the ongoing case between Ripple Labs and the US Securities and Exchange Commission (SEC), the cryptocurrency exchange has been ordered to pay $125m in civil penalties.
Analisa Torres, District Judge of the Southern District of New York, found that Ripple Labs’ native XRP token has violated 1,278 institutional sale securities laws.
Torres also ruled that there will be an injunction filed against future securities law violations on Ripple tomorrow (14 August). This follows on from Torres’ finding that Ripple violated federal securities laws with the direct sale of XRP to institutional clients last year.
However, in the same court verdict, Ripple was found not to have broken any programmatic sales laws of XRP to retail clients via exchanges and therefore did not break any securities laws, which was viewed as a win for the exchange and US crypto companies.
Torres stated: “Rather, the Court finds that Ripple’s willingness to push the boundaries of the Order evinces a likelihood that it will eventually (if it has not already) cross the line.
“On balance, the Court finds that there is a reasonable probability of future violations, meriting the issuance of an injunction.
“The SEC is also authorised to seek the imposition of civil monetary penalties, which serve the dual goals of punishment of the individual violator and deterrence of future violations.”
Despite the $125m fine, and the likelihood of the SEC contesting and appealing Torres’ verdict from last year, Ripple CEO Brad Garlinghouse declared the penalty ruling a victory for the company.
This is due to the SEC seeking a substantially heftier fine of up to $1bn. In its initial lawsuit against Ripple back in 2020 against Garlinghouse and Christian Larsen, the SEC alleged that the company “raised over $1.3bn through an unregistered, ongoing digital asset securities offering”.
Garlinghouse stated after the penalty verdict: “The SEC asked for $2B, and the Court reduced their demand by 94% recognising that they had overplayed their hand. We respect the Court’s decision and have clarity to continue growing our company.
“This is a victory for Ripple, the industry and the rule of law. The SEC’s headwinds against the whole of the XRP community are gone.”