Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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XRP Pumps 20% After SEC vs Ripple Case Finally Ends
Enforcement | Aug 8, 2024
Image: Freepik/kjpargeter
Ripple's Legal Battle with the SEC Concludes with $125 Million Fine
On Aug 7, 2024, the case between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has finally come to an end, with Judge Analisa Torres issuing an injunction against Ripple for any potential future violations of securities laws and a $125 million civil fine.
Originally, the SEC was after a massive $1 billion disgorgement penalty and $900 million civil penalty but in the end Ripple is being required to pay a significantly reduced fee of $125 million. The difference is being attributed to the SECs regulatory approach or missteps.
See: Court Rules XRP Sales Not Investment Contracts: How the SEC Case Could Reshape Crypto Landscape
Interestingly, the court determined that Ripple violated Section 5 of the Securities Act by selling XRP to institutional investors (without registering the transaction(s) as a securities offering), however in the case of its programmatic XRP sales to retail investors the court concluded that it did not violet federal securities law.
The SEC asked for $2B, and the Court reduced their demand by ~94% recognizing 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…
— Brad Garlinghouse (@bgarlinghouse) August 7, 2024
Overview of the Ruling
- Ripple is required to pay $125 million for violating the Securities Act for the unregistered sale of XRP to institutional investors.
- The court issued a permanent injunction to prevent XRP from ever violating the Securities Act in the future. Ripple must register all future offers and sales of securities with the SEC.
See: Inside Federal Securities Laws and Crypto’s Tightrope
- Due to insufficient evidence of investor harm, the SEC's request for disgorgement was declined, so Ripple is not forced to repay any gains from the unregistered sales.
Outlook
Industry and legal experts see the verdict as a major win for industry that will impact future regulatory actions and provides a clearer regulatory framework for digital assets within U.S. securities laws, with the price of XRP pumping 20%.
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