The U.S. Securities and Exchange Commission (SEC) has aggressively pursued stringent penalties against Ripple Labs Inc. The regulator seeks a court order barring future violations (behavioral injunction) alongside financial penalties.

In a recent court filing in the Southern District of New York, the SEC outlined its case for imposing significant penalties on Ripple, citing the need for a deterrent to prevent future violations. The case began in 2020 and centers on allegations that Ripple conducted unregistered securities offerings through its sales of XRP.

The SEC’s fight for penalties intensified on May 6, 2024, when it filed its final reply brief in the lawsuit’s remedies phase. This document which was under seal was made public in redacted form on May 8, 2024.

The SEC’s filing argues that Ripple’s ongoing business operations, including continual sales of unregistered XRP, justify the imposition of both a behavioral injunction and substantial financial penalties. The Commission asserts that despite previous engagements with regulators, Ripple’s activities have not sufficiently conformed to securities laws, necessitating stringent oversight.

Jorge G. Tenreiro, lead SEC attorney in the case, stated, “Ripple’s actions not only lacked the necessary regulatory compliance but also indicated a pattern that might be repeated if not appropriately restrained.”

Ripple has argued that the rules were not clear and that the SEC’s approach was inconsistent, claiming they weren’t given enough warning that their actions broke the law. However, the SEC’s response points out that Ripple kept selling unregistered XRP even after they knew the legal rules.

The SEC wants to make Ripple give back the large sums of money they made from these sales and also wants to fine them heavily. These penalties are meant to take back Ripple’s profits and serve as a strong warning to prevent similar issues in the future.

Ripple’s chief legal officer, Stuart Alderoty, reacted to the SEC’s response in the remedies brief by noting that the SEC’s reputation is deteriorating. He pointed out that international financial regulators with well-established crypto licensing systems might be taken aback by the SEC’s approach suggesting it treats its regulatory work like issuing fishing licenses.