NY Judge Slaps Down SEC, Ripple’s Second Request for an Indicative Ruling on Proposed $50M Settlement

Judge Analisa Torres of the Southern District of New York (SDNY) rejected a joint request from the SEC and Ripple Labs to approve a settlement agreement. The agreement would have reduced Ripple’s civil penalty to $50 million and dissolved the permanent injunction against the firm. Judge Torres’s primary concern was the removal of the injunction, not the reduced penalty.

The judge’s ruling emphasized the “reasonable probability” that Ripple would continue violating federal securities laws, a finding that remains unchanged. The injunction, she argued, serves to ensure Ripple’s compliance with the law. The court’s original imposition of the injunction was deemed necessary due to the significant sums of money involved in Ripple’s violations and the company’s incentive to repeat such actions.

This rejection follows significant changes at the SEC under new leadership, which has adopted a more crypto-friendly approach. This shift has included the creation of a Crypto Task Force and the dropping of various investigations and lawsuits against crypto companies. However, Judge Torres noted that most of these cases were dismissed before a court found a violation of federal securities laws.

Corey Frayer, director of investor protection at the Consumer Federation of America, criticized the SEC’s actions, arguing that granting favors to crypto companies could damage the agency’s 90-year reputation. He highlighted the importance of consistency in enforcement to maintain the agency’s credibility.

This is the second time Judge Torres has rejected a similar request from the SEC and Ripple. A previous attempt was rejected due to jurisdictional and procedural flaws. The current request argued for “exceptional circumstances” to justify modifying the final judgment, but the court found these arguments insufficient.

Judge Torres stated that while parties are free to resolve disputes amicably, they cannot unilaterally disregard a court’s final judgment. She emphasized that to do so requires demonstrating exceptional circumstances outweighing the public interest and the administration of justice, which the SEC and Ripple failed to do.

To end the litigation, the parties can withdraw their appeals or file a new appeal. However, neither option will relieve Ripple of its obligations under the law, according to the judge’s ruling.