In a significant legal blow to Ripple Labs, a federal judge has rejected a joint request from the company and the US Securities and Exchange Commission (SEC) to finalize a $50 million settlement in their ongoing legal dispute.
This unexpected ruling by Judge Torres could complicate the regulatory landscape for Ripple, which has been embroiled in a contentious battle with the SEC over its business practices over the past years.
Judge Rejects Ripple-SEC Settlement
As reported by Bitcoinist last week, the proposed settlement was intended to address a civil penalty of $125 million levied against Ripple in a final judgment issued on August 7, 2024.
Under the terms of the agreement, Ripple aimed to pay $50 million to the SEC, which would partially satisfy the penalty. The remaining funds were to be returned to the blockchain payment firm, contingent upon the court agreeing to dissolve an injunction that had been imposed on the blockchain payment firm. This injunction has significant implications for Ripple’s operations and future prospects.
However, Judge Torres denied the request, highlighting procedural missteps made by both parties. According to legal expert commentary on X (formerly Twitter), the judge indicated that Ripple and the SEC had filed their request under the incorrect legal framework.
They utilized Rule 62.1, which is appropriate for cases currently on appeal. In contrast, their actual request involved vacating a final judgment, which would require filing under Rule 60. This distinction is critical, as Rule 60 is designed for more serious legal actions, particularly those seeking to erase existing injunctions.
Options To Address $125 Million Penalty
The judge’s ruling underscores the gravity of the situation; courts are generally reluctant to overturn final rulings, even with mutual agreement between the parties.
Judge Torres noted that the request lacked arguments for “exceptional circumstances,” a standard necessary for such legal relief. The absence of these arguments, and the failure to cite Rule 60, ultimately led to the rejection of the settlement.
So, what are Ripple’s next steps? The company has several options moving forward. It could refile its request under the correct legal rule, providing a robust justification for the dissolution of the injunction.
Alternatively, Ripple might choose to split the request by modifying the fine while leaving the injunction in place. Finally, the company could opt to proceed with its appeal, risking the potential for further legal complications.
With this setback, Ripple’s legal battle is far from over. The company still faces a substantial $125 million penalty, and the injunction remains in effect. Meanwhile, the SEC’s case against Ripple continues to be active, leaving the future of the blockchain payment firm uncertain.
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