According to Wu Shuo: The U.S. Securities and Exchange Commission (SEC) has responded to Ripple's request to reduce a significant fine initially imposed on the company. Ripple sought to cap the fine at $10 million, referencing a similar ratio used in the Terraform case. However, the SEC argues that the fine should be significantly higher, aligning with Ripple's gross profits rather than gross sales.
Details of the Case
Ripple requested a reduction of the $2 billion fine imposed on it. Ripple compared its situation to the Terraform case, suggesting that the fine should be capped at 1.27% of its gross sales, equivalent to $10 million.
The SEC noted that Ripple compared Terraform’s fine to its “gross sales” and proposed a similar ratio to cap the fine at $10 million.
SEC’s Argument
The SEC countered Ripple's comparison, stating that the ratio should be applied to Ripple's gross profits, not gross sales.
- Gross Profits vs. Gross Sales: The SEC highlighted that Ripple's gross profits totalled $876.3 million, and applying the same ratio of 1.27% to the profits would result in a fine of $102.6 million.
- Purpose of Civil Penalties: The SEC emphasized that a mere $10 million fine would be insufficient to meet the objectives of the civil penalty statute, which is designed to serve as a deterrent and a punishment proportionate to the wrongdoing.
“The SEC believes that the ratio should be applied to the $876.3 million in gross profits, resulting in a fine figure ($102.6 million) that is much higher than the $10 million cap that Ripple insisted on. Such a low fine does not meet the purpose of the civil penalty statute,” the SEC stated.
Legal Implications
- Deterrence and Proportionality: The SEC's stance underscores the importance of the fine serving as an adequate deterrent against future violations and being proportionate to the gains derived from the alleged misconduct.
- Precedent for Future Cases: This decision could set a precedent for how fines are calculated in similar cases, focusing on gross profits rather than gross sales to determine the appropriate penalty.
The SEC's response to Ripple's fine reduction request reflects its commitment to enforcing securities laws firmly and proportionately. While Ripple sought to lower its financial penalty by using a benchmark based on gross sales, the SEC insists on a higher fine based on the company’s gross profits to fulfil the statutory objectives of deterring wrongdoing and administering justice appropriately.
