Ripple hit with $125m fine for securities violations; XRP surges 18% post-ruling

U.S. District Judge Analisa Torres has imposed a $125 million fine on Ripple Labs for violating securities laws.

In a judgment delivered on Aug. 7, Judge Torres found that 1,278 institutional sales of Ripple (XRP) went against section 5 of the U.S. Securities Act.

In addition to the $125 million fine, the judge also banned Ripple from any further violations of federal securities laws in the future. Judge Torres said she issued the injunction with Ripple’s “demand on liquidity” offering in mind, which she felt could probably “cross the line” laid out in the federal securities provisions.

Judge Torres’ injunction requires Ripple to formally register its intentions if it wants to sell securities in the future, thus ensuring compliance moving forward.

The judgment is the culmination of a case that began in December 2020 when the U.S. Securities and Exchange Commission filed a lawsuit against Ripple Labs, accusing it of engaging in the unlawful offer of securities when it put XRP on sale. 

In the lawsuit, the SEC claimed Ripple had raised more than $1.3 billion through the sale of XRP without first registering the token as a security, as required under U.S. federal law.

In July 2023, Judge Torres partially ruled in favor of Ripple, stating that the company’s programmatic sale of XRP to retail customers through crypto exchanges did not violate federal securities laws. However, the judge pointed out that Ripple’s institutional offerings were a violation of the same laws.

Following that finding, the SEC asked the court for $1 billion in disgorgement and $900 million in civil penalties against Ripple. 

However, the penalty handed out by Judge Torres is more than 90% lower than what the SEC sought, a fact which has led Ripple CEO Brad Garlinghouse to describe the ruling as a “victory” for the company and the crypto industry as a whole.

Ripple’s chief legal officer Stuart Alderoty also took to X to comment on the court’s decision. He noted that there had been no allegations of fraud or deliberate misconduct against Ripple, and that no financial harm as a result of the XRP sale was reported.

Following the ruling, the price of XRP has jumped 18%, and is currently trading at $0.6051. The current price is also a 39% markup across 30 days, and a more modest 0.7% improvement over 7 days.