Judge Torres Ends Long-Running Ripple SEC Case

The Southern District of New York Court in the final judgment held defendant Ripple Labs liable to pay $125 million instead of $2B aimed by the U.S. SEC.

The United States Securities and Exchange Commission (SEC) has 60 days to appeal Judge Analisa Torres’ final judgment in the Ripple Labs Inc. case, which ordered the crypto company to pay $125 million in civil penalties for violating registration provisions.

However, the regulator can also appeal after Ripple pays the civil penalties to the regulator in 30 days. If the regulator files an appeal, “presumably the money will be held pending resolution of the appeal,” former SEC lawyer Marc Fagel said.

The SEC has not yet indicated whether it will appeal the decision, but lawyers in the case expect both the regulator and Ripple to file appeals.

Ripple Labs CEO Brad Garlinghouse and CLO Stuart Alderoty said in recent interviews that they were happy with the decision and did not plan to appeal.

However, some legal experts interpreted the executives’ statements as indicating that the SEC would not appeal the decision.

“I think people are reading too much into Brad’s statement,” Pro-XRP lawyer Bill Morgan said. “Stuart said nothing that indicates he believes the SEC will or will not appeal.”

The final judgment in the case largely favored Ripple Labs, with the court rejecting the SEC’s request for $2 billion in civil penalties and a permanent injunction on XRP sales.

Instead, the court ordered Ripple Labs to pay $125 million in civil penalties and barred the company from selling XRP to institutional investors and offering On-Demand Liquidity (ODL) services without a registration statement.

The SEC had argued that all XRP sales by Ripple Labs constituted an unregistered securities offering, while the crypto company maintained that only its sales of XRP were subject to registration.

In December 2022, Judge Torres granted the SEC partial summary judgment on the issue of whether Ripple’s pre-2018 XRP sales were subject to registration, but she denied the regulator’s request for summary judgment on the issue of whether Ripple’s post-2018 XRP sales were also subject to registration.

The court also rejected the SEC’s request for a permanent injunction on all XRP sales by Ripple Labs, finding that the regulator had failed to demonstrate that such an injunction was necessary to protect investors.

Instead, the court imposed a more limited injunction, barring Ripple Labs from selling XRP to institutional investors and offering ODL services without a registration statement.

The SEC had argued that Ripple’s XRP sales to institutions and its ODL services both constituted unregistered securities offerings, while Ripple maintained that neither activity was subject to registration.

The final judgment in the case is a significant victory for Ripple Labs, as it largely vindicates the crypto company’s position that its XRP sales were not subject to registration.

However, the SEC still has the option to appeal the decision, and both parties are expected to cross-appeal on the remaining legal issues in the case.

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