Key Takeaways
- Charges dismissed are tied to the aiding and abetting of sales of XRP, which a judge had previously ruled amounted to unregistered sales of securities.
- SEC notified the U.S. District Court for the Southern District of New York that the parties involved in the case have mutually agreed to “dismiss with prejudice,”
In a significant development in the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and blockchain company Ripple Labs, the SEC has announced the dropping of claims against two key Ripple executives, Brad Garlinghouse, the Chief Executive, and Chris Larsen, the co-founder.
The lawsuit initially alleged that Ripple violated U.S. securities law through the sale of its cryptocurrency, XRP. In an official court filing on October 19, the SEC notified the U.S. District Court for the Southern District of New York that the parties involved in the case have mutually agreed to “dismiss with prejudice,” indicating there is no need for an upcoming trial against the executives.
However, it is important to note that the SEC did not state any intention to drop its civil case against Ripple itself, a lawsuit initially filed in 2020.
The specific charges that have been dismissed with prejudice are those related to the aiding and abetting of sales of the cryptocurrency XRP, which a judge had previously ruled amounted to unregistered sales of securities.
This dismissal with prejudice implies that these charges cannot be filed again in the future. The SEC’s legal action against Ripple as a company will continue.
In response to this latest development, Ripple’s Chief Legal Officer, Stuart Aldeorty, described the SEC’s decision as “a surrender” rather than a settlement. Ripple issued a statement characterizing the SEC’s actions as a “stunning capitulation.”
Brad Garlinghouse, in an October 19 statement on X (formerly Twitter), expressed his views on the matter, stating, “Chris and I […] 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 decade.”
The SEC’s involvement in the Ripple case began in December 2020 when it filed a lawsuit against Garlinghouse, Larsen, and Ripple, primarily focusing on the sale of XRP tokens, which the commission had asserted were securities. In a significant ruling in July, a federal judge concluded that XRP did not qualify as a security when sold to retail investors.
In a related development, Judge Torres issued an order on October 3 denying the SEC’s motion against Ripple. The judge cited the regulator’s failure to meet the burden of demonstrating controlling questions of law or substantial grounds for differences of opinion on the matter.
SEC and Ripple have now stated their intent to discuss a potential briefing schedule for addressing the pending issue in the case: what remedies are appropriate against Ripple for its Section 5 violations concerning the institutional sales of XRP
