Ripple’s Garlinghouse Says SEC to Seek $2 Billion in Crypto Case

Chris Dolmetsch, Bloomberg News

Brad Garlinghouse

, Bloomberg

(Bloomberg) -- Ripple Labs Inc. should pay more than $2 billion in fines and penalties for selling its XRP token to institutional investors, the US Securities and Exchange Commission told a federal judge, saying that the company has increased sales of the cryptocurrency since it was sued by the regulator, hasn’t accepted responsibility and intended to evade the law.

The punishment is needed to stop Ripple from violating securities laws “given Ripple’s enormous amount of unregistered sales of XRP over the last three years,” the SEC told US District Judge Analisa Torres in a brief filed in federal court in Manhattan late Monday. The company hasn’t accepted responsibility for its actions, has made statements interpreting a July ruling in the case as a “total victory” and ignored the advice of lawyers to not sell the token for cash or promote it as an investment, the agency said.

“It opted for the money it gained by promoting an investment it sold for cash, while acting with the apparent fear that the disclosure of its finances and business activities required by law of those who sell securities would interfere with its profitable plan,” the SEC said. “Only a significant sanction from this court and the return of the ill-gotten gains Ripple made from its violations will cause Ripple to correct its conduct, either by registering its securities sales and making the disclosures required, or not selling securities.”

Stuart Alderoty, chief legal officer for Ripple, said on X.com on Monday that the SEC “remains bent on wanting to punish and intimidate Ripple - and the industry at large,” and that he trusts the judge to “approach the remedies phase fairly.” The company is scheduled to respond to the agency’s brief next month.

The SEC sued Ripple in 2020, claiming the firm broke its rules when it raised money by selling the digital token without registering it as a security. The case is being closely watched by crypto enthusiasts because of its implications for the scope of the SEC’s turf. In what’s been seen by many as a loss for the agency’s jurisdiction, Torres in July ruled that sales of XRP to retail investors on exchanges didn’t amount to investment contracts.

XRP fell 2.7% to 63 cents on Tuesday. The token has increased around 2.4% this year.

(Adds details of SEC filing, beginning in the first paragraph.)