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Recently, an important development occurred in the cryptocurrency market. Terraform Labs agreed to settle with the SEC and pay $4.47 billion. As a reflection of this situation, Ripple, which is still undergoing a trial process, made a statement. Ripple stated that the settlement demand is unrealistic and called for the court to reject this settlement.
SEC Demanded $4.47 Billion
The SEC’s $4.47 billion demand was mainly based on the claim that Kwon and his company were responsible for a significant securities fraud that caused investors to lose approximately $40 billion.
On the other hand, it is known that the court also held Kwon and Terraform Labs responsible for this major fraud. Additionally, the court describes the issue as the largest securities fraud.
Ripple Finds the Penalty Disproportionate
Ripple argued that the penalty is disproportionate, basing this on Terraform Labs’ $33 billion gross sales. The given penalty represents 1.27% of these sales. Ripple also claimed that the SEC acts hypocritically in such cases, stating that in the past, the SEC demanded much smaller settlements in more serious cases.
Ripple noted that penalties should be around 0.6% as in past examples and described the SEC’s demand as excessive. Another important point Ripple made is that there is no fraud allegation in this case and that institutional investors did not suffer significant losses. In this context, Ripple stated that the penalty should be significantly lower.
Coinbase Also Considers the Penalty High
Paul Grewal, head of Coinbase’s legal department, also considers the penalty high. He criticized the SEC’s settlement demand, questioning its effectiveness and ability to provide practical solutions for Terraform victims. Grewal suggested that a $7 million settlement would be more appropriate.
The criticisms from Ripple and Coinbase are not in vain. Both organizations are known to be in litigation with the SEC. Especially Ripple could be seriously affected by this decision. If the court accepts the settlement, it could mean billion-dollar penalties for Ripple. Therefore, Ripple is calling on the court not to approve the penalty.
