Ripple CEO Brad Garlinghouse calls SEC lawsuit regulatory overreach

Brad Garlinghouse, CEO of Ripple, and Ripple’s co-founder Chris Larsen prepared court filings in response to amended complaint by the U.S. Securities and Exchange Commission (SEC). The regulator singled out individual accountability for top executives.

Today, a letter was filed on my behalf indicating my intent to file a Motion to Dismiss in response to the SEC’s amended complaint against me. Simply put, the SEC’s allegations are regulatory overreach. The letter speaks for itself: https://t.co/bwj9YdDOQw

— Brad Garlinghouse (@bgarlinghouse) March 3, 2021

Garlinghouse called the SEC’s allegations “regulatory overreach.” He intends to move to dismiss the suit.

Lawyers from Cleary Gottlieb Steen and Hamilton said the commission’s claims are unfounded for a number of reasons. Among them is the SEC’s failure to acknowledge the “economic realities of the defendant’s XRP transactions, the XRP market, and Ripple’s business”.

“All of them lack the traditional characteristics of an investment contract,” the letter states.

In the lawyers’ view, imposing individual liability on an executive for “performing his duties within the law” is an overreach by the prosecution.

“This is a dangerous signal for entrepreneurs that will hinder innovation,” Cleary Gottlieb Steen and Hamilton said.

Ripple co-founder Chris Larsen also filed a motion to dismiss the suit, arguing its lack of merit. The document states the SEC failed to prove that the executive provided “substantial assistance” to the company in token sales and knew XRP met the definition of a security.

“The SEC stated that XRP sales over an extended period constituted a single offer… the statute of limitations began in 2013 and expired in 2018,” the letter states.

Independent lawyer Jeremy Hogan noted that the commission indeed did not prove intentional wrongdoing by Garlinghouse.

Hogan said that the court could deny the motion. However, this does not preclude a favorable outcome for the leadership and the company in the future, the expert concluded.

In December 2020, the SEC accused Ripple of selling unregistered securities in the form of tokens worth $1.3 billion. The defendants were also Brad Garlinghouse and Chris Larsen.

The company’s CEO called the suit a horrific precedent for the entire cryptocurrency industry. According to him, Ripple has always worked in partnership with regulators.

In January 2021, the defendants’ lawyers asked the SEC for information about why it does not classify Bitcoin and Ethereum as securities.

At the end of January 2021, a Florida resident sued Ripple Labs and Garlinghouse for violating state securities laws and illicit enrichment.

Tetragon Financial Group, which led Ripple’s Series C funding round of $200 million in 2019, also pressed claims against the company.

As noted, several major companies withdrew support for XRP amid the SEC’s claims, including Coinbase and OKCoin, Bitstamp and Grayscale Investments.

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