In the ongoing legal battle between Ripple Labs Inc. and the US Securities and Exchange Commission (SEC), Ripple has made a strategic move to contest the SEC's proposed penalties by invoking recent developments in a parallel case involving Terraform Labs.

In a filing dated June 13, 2024, Ripple's legal team, represented by Michael K. Kellogg from Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., submitted a notice of supplemental authority to the Southern District of New York. The filing draws parallels between Ripple's situation and the recent SEC vs. Terraform Labs Pte. Ltd. case, which concluded with substantial penalties against Terraform.

In the Terraform case, the SEC secured a final consent judgment requiring Terraform Labs to pay $3.59 billion in disgorgement and a $420 million civil penalty, reflecting approximately 1.27% of Terraform's gross sales. Ripple's filing argues that this outcome sets a precedent that underscores the disproportionality of the SEC's penalties sought against Ripple.

Key arguments in Ripple's filing emphasize that unlike Terraform, which faced allegations of extensive securities fraud resulting in significant investor losses, Ripple's case involves no fraud allegations. The comparison seeks to highlight what Ripple perceives as an unjustifiably high penalty proposed by the SEC, especially in light of historical penalties imposed by the SEC in similar cases, which typically range from 0.6% to 1.8% of gross revenues.

Ripple's legal strategy aims to challenge the SEC's demands as excessive and unprecedented, particularly advocating for a cap on civil penalties at $10 million, significantly lower than the SEC's proposed $2 billion fine related to the sale of XRP to institutional investors.

By leveraging the Terraform case as a point of reference, Ripple seeks to portray the SEC's actions as inconsistent and unfair, arguing for a more balanced and equitable resolution in its ongoing legal proceedings. This approach not only questions the fairness of the SEC's penalties but also positions Ripple's stance on regulatory overreach within the context of recent judicial outcomes in similar cases.