Ripple faces $125 million fine for selling unregistered securities in SEC case

A federal court ordered cryptocurrency firm Ripple Labs to pay a civil penalty of $125 million for selling unregistered securities to institutional investors, marking what the firm views as a victory in its yearslong legal battle with the SEC.

The case, SEC vs. Ripple Labs Inc., surrounds Ripple’s XRP token, “the native digital token of the XRP Ledger, a cryptographically secured ledger or 'blockchain,'” according to the ruling, filed Aug. 7 in U.S. District Court in New York.

With its initial complaint dating back to 2020, the SEC previously alleged that Ripple engaged in unregistered XRP sales via institutional sales, programmatic sales and other distributions. However, in 2023, the court determined that only Ripple’s institutional sales constituted the offer or sale of investment contracts, according to the ruling.

The SEC sought for Ripple to pay nearly $2 billion in fines — including $876 million in disgorgement, $198 million in prejudgment interest and another $876 million civil penalty — while the crypto firm contended that “any civil penalty should not exceed $10 million,” as detailed in the ruling.

U.S. District Judge Analisa Torres denied the SEC’s requests for disgorgement and prejudgment interest, and partially granted its request for a civil penalty. Specifically, her final judgment enjoins Ripple “from further violations of the securities laws and (imposes) a civil penalty” of $125 million, the ruling said.

"The court's decision today shows that the SEC's overreach and absurdity was on full display — their last-ditch effort to extort our company was off by 94%," Ripple CEO Brad Garlinghouse said in an Aug. 7 statement. "By rejecting the SEC's last-gasp attempt to extract unwarranted remedies from us, the court confirms what we've always known: Chair (Gary) Gensler's SEC is detached from reality, ignores facts, and operates outside the law. Despite Chair Gensler's best efforts, both Ripple and the broader crypto industry have emerged from this chapter stronger than ever.”

SEC Chair Gary Gensler has long been critical of the crypto industry and spoken out about what he says is rife noncompliance with the law. At a May conference in Washington, Gensler said, “This is a field where some of the leading lights of the field are either now in jail, or awaiting jail, or awaiting extradition.”

When asked for comment on the court’s decision, an SEC spokesperson highlighted that Torres wrote that Ripple showed a “willingness to push the boundaries” of her last ruling, which “evinces a likelihood that it will eventually (if it has not already) cross the line,” the judge said.

“As court after court has stated, the securities laws apply when firms offer and sell investment contracts, regardless of the technology or labels that they use,” the SEC spokesperson said in a statement.

Chris Larsen, co-founder and executive chairman of Ripple, said in a post on X, formerly known as Twitter, he hoped the ruling could incite change in Washington.

“The SEC's unhinged campaign against us is finally over,” Larsen wrote in an Aug. 7 post. “Let’s all hope this ends this Administration’s war on crypto.”