Key Points
- A federal judge ordered Ripple to pay a $125 million civil penalty for violating securities laws through institutional XRP sales, significantly less than the SEC’s requested $1.9 billion in penalties and disgorgement.
- XRP’s price surged 26% following the ruling, reaching $0.63. Ripple executives hailed the decision as a victory for the cryptocurrency industry, while traders scrambled to adjust their positions.
On August 7, 2024, U.S. District Judge Analisa Torres of the Southern District of New York ordered Ripple Labs to pay a $125 million civil penalty, marking a significant development in the long-running legal battle between the company and the U.S. Securities and Exchange Commission (SEC). The ruling follows her July 2023 decision that found Ripple’s institutional sales of XRP violated federal securities laws.
The $125 million fine is substantially lower than the SEC’s initial demand for $1 billion in disgorgement and prejudgment interest, plus $900 million in civil penalties. Judge Torres reiterated her previous stance that Ripple’s programmatic sales of XRP to retail clients through exchanges did not violate securities laws, a point the SEC had unsuccessfully attempted to appeal during the case.
In addition to the monetary penalty, the judge imposed an injunction against future securities law violations by Ripple. The court order requires Ripple to file a registration statement if it intends to sell any securities in the future, noting concerns about the company’s “on-demand liquidity” offerings.
“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,” Judge Torres stated. “On balance, the Court finds that there is a reasonable probability of future violations, meriting the issuance of an injunction.”
The cryptocurrency market responded swiftly to the news, with XRP’s price surging 26% to $0.63 shortly after the announcement. This rally erased most of XRP’s losses during the broader crypto downturn since August 5. At the time of writing, XRP is trading at $0.59, representing a 44.88% increase over the past 30 days.
Ripple executives took to X to express their views on the ruling. CEO Brad Garlinghouse stated:
“This is a victory for Ripple, the industry, and the rule of law. The SEC’s headwinds against the whole XRP community are gone”.
Ripple’s Co-founder Chris Larsen added:
“The SEC’s unhinged campaign against us is finally over. Let’s all hope this ends this Administration’s war on crypto”.
The price surge caught many traders off guard, resulting in significant liquidations. Data from CoinGlass shows that $5.4 million worth of short positions were liquidated within four hours of the price spike. If the upward momentum continues and XRP reaches $0.65, another $20 million in short positions could be at liquidation risk.
While Ripple executives and supporters are celebrating this development as a victory, it’s worth noting that the SEC is likely to appeal the July 2023 ruling now that the judge has imposed a sentence. The regulator’s previous attempt at an interlocutory appeal was denied last year.
After that interlocutory appeal was denied, the SEC and Ripple had previously settled charges tied to CEO Brad Garlinghouse and other executives.
As the case appears to be nearing its final stages, the cryptocurrency community remains watchful for any further developments that could impact XRP’s classification and the broader regulatory landscape for digital assets in the United States. The outcome of this case could have far-reaching implications for how other cryptocurrencies are regulated in the future.
