Federal Judge Orders Ripple to Pay $125 Million in Civil Penalties

A federal judge has ordered Ripple to pay $125 million in civil penalties and imposed an injunction against future securities law violations. District Judge Analisa Torres of the Southern District of New York issued the fine after finding that Ripple violated securities laws in 1,278 institutional sale transactions.

The penalty is significantly lower than the $1 billion in disgorgement and prejudgment interest and $900 million in civil penalties originally sought by the Securities and Exchange Commission (SEC). This order follows the judge's July 2023 ruling, which determined that Ripple's direct sale of XRP to institutional clients violated federal securities laws. However, the judge ruled that Ripple's programmatic sales of XRP to retail clients through exchanges did not constitute a securities law violation.

The SEC's attempt to appeal this portion of the ruling during the case was unsuccessful. Judge Torres' recent order emphasizes the potential for future violations by Ripple, particularly in reference to the company's "on demand liquidity" offerings. The judge stated, "Rather, the Court finds that Ripple’s willingness to push the boundaries of the Order evinces a likelihood that it will eventually (if it has not already) cross the line. On balance, the Court finds that there is a reasonable probability of future violations, meriting the issuance of an injunction."

As part of the injunction, Ripple must file a registration statement if it plans to sell any securities. The SEC is expected to appeal the July 2023 ruling now that the sentencing has been imposed. This follows Judge Torres' denial of the SEC's motion for an interlocutory appeal last year. After the denial, the SEC and Ripple settled charges related to CEO Brad Garlinghouse and other executives.

Despite the legal challenges, Ripple's XRP coin surged by 18% at the time of writing, reflecting investor optimism following the judgment. The legal battle between the SEC and Ripple has been closely watched as it addresses the broader regulatory status of cryptocurrencies and their classification under U.S. securities laws. Ripple's case could set a significant precedent for how digital assets are regulated and the responsibilities of companies in the cryptocurrency space.