Ripple hit with $125m fine for securities violations; XRP surges 18% post-ruling

US District Judge Analisa Torres fined Ripple Labs $125 million for violating securities laws.

Judge Torres ruled in his August 7 decision that the sale of 1,278 institutional Ripple (XRP) violated Section 5 of the US Securities Act.

In addition to the $125 million fine, the judge also barred Ripple from violating federal securities laws in the future. Judge Torres said he issued the injunction with Ripple’s “liquidity solicitation” bid in mind, which he believed could “potentially cross the line” set forth in federal securities laws.

Judge Torres’ preliminary injunction requires Ripple to formally register its intention to sell securities if it intends to do so in the future, thus ensuring future compliance.

The decision is the culmination of a lawsuit the U.S. Securities and Exchange Commission filed in December 2020 against Ripple Labs, accusing it of engaging in an illegal securities offering when it offered XRP for sale.

The SEC alleged in the lawsuit that Ripple raised more than $1.3 billion through the sale of XRP without registering the token as a security under U.S. federal law.

In July 2023, Judge Torres ruled in part in favor of Ripple, stating that the company’s programmatic sale of XRP to retail customers through crypto exchanges did not violate federal securities laws. However, the judge noted that Ripple’s institutional offerings violated the same laws.

Following this finding, the SEC requested the court to impose $1 billion in ill-gotten gains and a $900 million civil penalty on Ripple.

However, Judge Torres’ sentence is 90% lower than what the SEC requested, leading Ripple CEO Brad Garlinghouse to describe the decision as a “victory” for the company and the cryptocurrency industry.

The SEC sought $2 billion and the Court reduced their request by approximately 94%, acknowledging that they overplayed their hand. We respect the Court’s decision and have the clarity to continue growing our company.

This is a victory for Ripple, the industry, and the rule of law. The SEC…

— Brad Garlinghouse (@bgarlinghouse) August 7, 2024

Ripple’s chief legal officer Stuart Alderoty also took to X to comment on the court’s decision. He noted that there were no allegations of fraud or willful misconduct against Ripple and that no financial losses were reported as a result of the XRP sale.

Final decision. The court rejects the SEC’s claim that Ripple acted recklessly and reminds the SEC that this case does not involve any allegations of fraud or intentional wrongdoing and that no one suffered any financial harm. Rejects the SEC’s absurd $2 billion demand… https://t.co/RbwpBnoXJG

— Stuart Alderoty (@s_alderoty) August 7, 2024

Following the decision, the price of XRP has increased by 18% and is currently trading at $0.6051. The current price is also up 39% over 30 days and a more modest 0.7% improvement over 7 days.