The U.S. Securities and Exchange Commission (SEC) withdrew the lawsuit against Ripple co-founders Chris Larsen and CEO Brad Garlinghouse, accusing them of violating securities laws.
Against this backdrop, the XRP token rose above $0.50.
The parties reached a global settlement on the claims. This means that no future claims on the same grounds can be brought against the defendants.
“The SEC made a serious mistake pursuing Brad and Chris personally – and now, they’ve capitulated, dismissing all charges against our executives. This is not a settlement. This is a surrender,” said Ripple’s chief legal officer Stuart Alderoty.
The SEC made a serious mistake going after Brad & Chris personally – and now, they’ve capitulated, dismissing all charges against our executives. This is not a settlement. This is a surrender by the SEC. https://t.co/TOsG64ZdEx
— Stuart Alderoty (@s_alderoty) October 19, 2023
In December 2020, the SEC filed a lawsuit against the California-based company Ripple. The regulator alleged that the firm sold unregistered securities in the form of XRP over seven years, totaling about $1.39 billion.
The defendants in the suit included Garlinghouse and Larsen, whom the regulator described as “major holders of the security”. According to the complaint, they collectively sold tokens worth $600 million.
Among the allegations against the Ripple chief were his statements about “playing the long game.” Allegedly hinting to investors that he was withholding coins, Garlinghouse was actually disposing of them.
On June 13, 2023, the company secured a partial victory in the case. Judge Analisa Torres ruled that programmatic sales and other distributions of tokens did not constitute the sale of investment contracts. However, according to the court’s decision, XRP’s sale to institutional participants in the industry violated securities laws.
The SEC attempted to appeal the court’s order, but Torres rejected the regulator’s interlocutory appeal. She found that the Commission had not provided enough evidence, and the arguments presented could not substantially advance the final dismissal of the case.
Alderoti noted that dropping the suit against Ripple’s leadership marked the regulator’s third defeat in the litigation, with no victories. Garlinghouse echoed the sentiment.
Today was an even better day.
Ripple: 3
SEC: 0In all seriousness, Chris and I (in a case involving no claims of fraud or misrepresentations) were targeted by the SEC in a ruthless attempt to personally ruin us and the company so many have worked hard to build for over a… https://t.co/YsQxewFnj9
— Brad Garlinghouse (@bgarlinghouse) October 19, 2023
“We, Chris and I, were seriously targeted by the SEC in a merciless bid to destroy us personally and the company, after more than a decade of work by many,” he said.
The Ripple chief also hinted that, in pursuing them and the firm, the SEC turned a blind eye to consumer protection in real-world situations such as FTX.
“How many millions of taxpayer dollars have been spent in vain?! It’s nice to finally be vindicated,” Garlinghouse said.
What next?
Earlier, attorney Jeremy Hogan predicted possible paths for the SEC’s case against Ripple. One of the most likely possibilities he identified was settling claims against individual defendants and appealing the prior ruling.
“This is the best option for the SEC. For that reason I doubt they will go that route,” the lawyer said with irony.
However, the Commission has chosen that path. The regulator said that after settling with Garlinghouse and Larsen it would focus on Ripple’s claims.
Modifications to the case schedule are required. The SEC intends to present its proposed amendments by November 9.
According to Hogan’s earlier assessment, under this scenario a final verdict on the suit is not expected before August 14, 2026.
XRP and Bitcoin rose on the news
Over the past 24 hours, XRP rose more than 7% (CoinGecko). As of writing, the asset was trading near $0.51, with intraday moves above $0.53.
The rally was not helped by negative news. Yesterday, New York prosecutors accused major industry players—the Winklevoss twins’ Gemini and Barry Silbert’s Digital Currency Group—of deceiving investors by more than $1 billion.
In June the SEC filed suits against the Bitcoin exchanges Binance and Coinbase.
In September the regulator said that beyond these two platforms there are other CEX, as well as DeFi protocols, whose activities are being studied for potential violations of the law.