In a court filing on March 25, the US Securities and Exchange Commission (SEC) explained the basis for its recommendation that Ripple, a crypto company, should face a fine of approximately $2 billion. Ripple's CEO Brad Garlinghouse and CLO Stuart Alderoty had hinted about the upcoming disclosure of redacted court documents to the public by March 26.

The SEC's proposal suggests that Ripple Labs should pay $876 million for disgorgement, $198 million for prejudgment interest, and a $876 million civil penalty, totaling $1.95 billion. The substantial fine is attributed to the SEC's assertion of extensive unregistered XRP sales by Ripple over three years, aimed at deterring similar violations in the broader crypto industry.

Furthermore, the SEC accused Ripple of evading securities laws and misrepresenting a past court ruling on XRP, portraying it as a victory while deflecting blame. The regulator highlighted that Ripple failed to address its wrongdoings by withholding information from institutional investors and decreasing transparency concerning XRP sales, diverting accountability to the SEC.

The SEC contended that Ripple consciously bypassed regulations based on advice from an undisclosed law firm, suggesting the crypto company refraining from cash XRP sales or promoting it as an investment. By proposing a significant penalty, the SEC aims to prompt Ripple to comply by registering securities sales, providing essential disclosures, or abstaining from selling securities altogether to curb illicit actions within the crypto sector. The regulator asserts the importance of dissuading future misconduct akin to Ripple's operations and promoting integrity in the industry.