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Ripple Labs Inc. was ordered by a federal judge to pay a civil penalty of $125 million for selling its XRP token to institutional investors, a fraction of what U.S. regulators had sought in a lawsuit against the company.
The Securities and Exchange Commission sued Ripple Labs in 2020, claiming the firm broke SEC rules when it raised money by selling the digital token without registering it as a security. The case has been closely watched because of its implications for the scope of the SEC’s regulatory power.
The SEC had sought almost $2 billion in penalties in the case, including more than $876 million in disgorgement and more than $198 million in interest, along with an $876 million civil penalty. Ripple had said it shouldn’t have to pay more than $10 million.
XRP rose as much as 25% to 64 cents after the ruling. Still, the token, which is the seventh largest cryptocurrency by market value, is little changed this year. The ruling comes as cryptocurrencies have lost value amid the current bout of risk aversion in global markets.
The SEC and Ripple didn’t immediately respond to requests for comment on the decision.
US District Judge Analisa Torres in July 2023 found that XRP was covered by securities law only when sold to sophisticated institutional investors, a ruling hailed as a major victory for the industry. The SEC has several major cases against crypto exchanges and issuers, accusing them of offering unregistered securities.
On Wednesday, Torres granted the SEC’s request for an injunction barring Ripple from conducting unregistered offerings of XRP to institutional investors. But she denied the agency’s bid for Ripple to pay disgorgement of profits from its sales to institutional investors.
In ordering it to pay the civil penalty of $125 million, she said the case “does not involve allegations of fraud, misappropriation, or other more culpable conduct” and that the SEC hasn’t shown that Ripple’s failure to register the sales with the agency caused investors substantial losses.
The case is SEC v. Ripple Labs Inc., 20-cv-10832, US District Court, Southern District of New York (Manhattan).
Top photo: Ripple Labs Inc. signage during the Singapore FinTech Festival in Singapore, on Wednesday, Nov. 15, 2023. The festival runs through Nov. 17. Photographer: Lionel Ng/Bloomberg.