Assessment of Civil Money Penalty: In the Matter of Ripple Labs Inc. and XRP II, LLC (No. 2015-05)
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UNITED STATES OF AMERICA
DEPARTMENT OF THE TREASURY
FINANCIAL CRIMES ENFORCEMENT NETWORK
IN THE MATTER OF: )
)
)
) Number 2015-05
Ripple Labs Inc. )
San Francisco, California )
)
XRP II, LLC )
Columbia, South Carolina )
ASSESSMENT OF CIVIL MONEY PENALTY
I. INTRODUCTION
The Financial Crimes Enforcement Network (“FinCEN”) has determined that grounds exist
to assess a civil money penalty against Ripple Labs Inc. (“Ripple Labs”) and XRP II, LLC1
(collectively, “Respondents”), pursuant to the Bank Secrecy Act (“BSA”) and regulations issued
pursuant to that Act.2
Respondents admit to the facts set forth in Attachment A and that their conduct violated the
BSA. Respondents consent to the assessment of a civil money penalty and enter into the
CONSENT TO THE ASSESSMENT OF CIVIL MONEY PENALTY (“CONSENT”) with
FinCEN.
1
XRP Fund II, LLC, a wholly-owned subsidiary of Ripple Labs, was incorporated in South Carolina
on July 1, 2013. On July 2, 2014, XRP Fund II, LLC changed its name to XRP II, LLC. During a
portion of the relevant timeframe, the entity was named XRP Fund II, LLC, but it will be referred to
as XRP II throughout this ASSESSMENT.
2
The Bank Secrecy Act is codified at 12 U.S.C. §§ 1829b, 1951-1959 and 31 U.S.C. §§ 5311-5314,
5316-5332. Regulations implementing the Bank Secrecy Act appear at 31 C.F.R. Chapter X.
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The CONSENT is incorporated into this ASSESSMENT OF CIVIL MONEY PENALTY
(“ASSESSMENT”) by reference.
FinCEN has authority to investigate money services businesses for compliance with and
violation of the BSA pursuant to 31 C.F.R. § 1010.810, which grants FinCEN “[o]verall authority
for enforcement and compliance, including coordination and direction of procedures and activities
of all other agencies exercising delegated authority under this chapter[.]”
During the time periods identified in this ASSESSMENT, Ripple Labs and XRP II were
“financial institutions” and “money services businesses” within the meaning of the BSA and its
implementing regulations. 31 U.S.C. § 5312(a)(2); 31 C.F.R. §§ 1010.100(t), 1010.100(ff).
II. RESOLUTION WITH THE UNITED STATES ATTORNEY’S OFFICE FOR THE
NORTHERN DISTRICT OF CALIFORNIA
On the same date as the CONSENT, Respondents have entered into a Settlement Agreement
with the U.S. Attorney’s Office for the Northern District of California, which has agreed not to
criminally prosecute Respondents for the conduct described in the Statement of Facts attached as
Attachment A. Under that Agreement, Respondents have agreed to pay a forfeiture amount of
$450,000 and engage in the remedial steps also outlined in the Remedial Framework set forth in
Attachment B to the CONSENT and this ASSESSMENT.
III. DETERMINATIONS
Respondents willfully violated the BSA’s registration, program, and reporting requirements.3
First, until April 29, 2013, Ripple Labs acted as a money services business and engaged in sales of
3
In civil enforcement of the Bank Secrecy Act under 31 U.S.C. § 5321(a)(1), to establish that a
financial institution or individual acted willfully, the government need only show that the financial
institution or individual acted with either reckless disregard or willful blindness. The government
need not show that the entity or individual had knowledge that the conduct violated the Bank
Secrecy Act, or that the entity or individual otherwise acted with an improper motive or bad
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its virtual currency, known as XRP, without registering with FinCEN as a money services business;
in addition, while doing so, Ripple Labs failed to implement and maintain an anti-money laundering
program that was reasonably designed to prevent it from being used to facilitate money laundering
and the financing of terrorist activities. Second, from July 1, 2013 through the conclusion of
FinCEN’s investigation into Ripple Labs and XRP II on October 1, 2014, XRP II, which later
assumed Ripple Labs’s functions of selling virtual currency, failed to implement and maintain an
effective anti-money laundering program. And third, XRP II failed to report suspicious activity
related to several financial transactions.4
These violations, and the governing facts and law surrounding the violations, are described
more fully in Attachment A to this ASSESSMENT, which is incorporated by reference.
IV. CIVIL MONEY PENALTY
FinCEN has determined that Respondents willfully violated the registration, program, and
reporting requirements of the Bank Secrecy Act and its implementing regulations, as described in
this ASSESSMENT and in Attachment A, and that grounds exist to assess a civil money penalty for
these violations. See 31 U.S.C. § 5321 and 31 C.F.R. § 1010.820.
FinCEN has determined that the penalty in this matter will be $700,000. This penalty will be
deemed partially satisfied upon full payment of the forfeiture of $450,000 to the U.S. Attorney’s
Office for the Northern District of California, as described in Part II above; the remainder shall be
paid to the U.S. Department of the Treasury.
purpose. Respondents admit to “willfulness” only as the term is used in civil enforcement of the
Bank Secrecy Act under 31 U.S.C. § 5321(a)(1).
4
See 31 U.S.C. § 5330, 31 C.F.R. § 1022.380 (registration); 31 U.S.C. § 5318(a)(2), (h), 31 C.F.R.
§ 1022.210 (AML program); and 31 U.S.C. § 5318(g), 31 C.F.R. § 1022.320 (SAR reporting).
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V. UNDERTAKING
By executing the CONSENT, Respondents agree to the undertakings set forth in the
Remedial Framework in Attachment B of this ASSESSMENT and the CONSENT. Failure to
comply with any provision of this Remedial Framework will constitute a violation of the
CONSENT. If FinCEN determines that a failure to comply with the UNDERTAKING has
occurred, FinCEN may take any enforcement action against the Respondents it deems appropriate,
notwithstanding the Release in Part VII below. Additional actions taken by FinCEN may include,
but are not limited to, the imposition of additional civil money penalties, injunctive orders, or
ordering other remedial actions within the authorities of FinCEN.
VI. CONSENT TO ASSESSMENT
To resolve this matter, and only for that purpose, Respondents consent to the assessment of a
civil money penalty in the sum of $700,000 set forth in Part IV above, and to the undertakings set
forth in the Remedial Framework in Attachment B. Respondents admit to the Statement of Facts set
forth in Attachment A and admit that they willfully violated the BSA’s registration, program, and
reporting requirements, as set forth in Attachment A.
Respondents recognize and state that they enter into the CONSENT freely and voluntarily
and that no offers, promises, or inducements of any nature whatsoever have been made by FinCEN
or any employee, agent, or representative of FinCEN to induce Respondents to enter into the
CONSENT, except for those specified in the CONSENT.
Respondents understand and agree that the CONSENT embodies the entire agreement
between them and FinCEN relating to this enforcement matter only, as described in Section II above
and in Attachment A. Respondents further understand and agree that there are no express or implied
promises, representations, or agreements between them and FinCEN other than those expressly set
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forth or referred to in this document and that nothing in the CONSENT or in this ASSESSMENT is
binding on any other agency of government, whether Federal, State or local.
VII. RELEASE
Execution of the CONSENT, and compliance with the terms of this ASSESSMENT and the
CONSENT, including the UNDERTAKING set forth above, settles all claims that FinCEN may
have against Respondents for the conduct described in Section III of this ASSESSMENT and in
Attachment A. Execution of the CONSENT, and compliance with the terms of this ASSESSMENT
and the CONSENT, does not release any claim that FinCEN may have for conduct by Respondents
other than the conduct described in Section III of this ASSESSMENT and in Attachment A to this
ASSESSMENT, or any claim that FinCEN may have against any director, officer, owner, employee,
or agent of Respondents, or any party other than Ripple Labs and XRP II. Upon request,
Respondents shall truthfully disclose to FinCEN all factual information not protected by a valid
claim of attorney-client privilege or work product doctrine with respect to the conduct of their
current or former directors, officers, employees, agents, or others.
By:
/S/ May 5, 2015
Jennifer Shasky Calvery Date
Director, Financial Crimes Enforcement Network
U.S. Department of the Treasury
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