SEC drops lawsuit against Ripple CEO Brad Garlinghouse and Chairman Chris Larsen
The U.S. Securities and Exchange Commission has dismissed all charges against Ripple Labs Inc. Chief Executive Brad Garlinghouse and Executive Chairman Chris Larsen claiming the pair aided and abetted the company in violating U.S. securities laws.
The SEC filed its dismissal in an Oct. 19 document with the U.S. District Court of New York, in which the regulator informed the court that it intended to dismiss all claims with prejudice, meaning that it cannot file charges again. This represents another victory for the company in the lengthy saga since the SEC filed suit against Ripple in 2020. The SEC made no sign of dropping its original allegations against the company.
“For nearly three years, Chris and I have been the subject of baseless allegations from a rogue regulator with a political agenda,” said Garlinghouse in a statement. “Instead of looking for the criminals stealing customer funds on offshore exchanges that were courting political favor, the SEC went after the good guys.”
Ripple is the developer of a payment protocol and exchange network, best known for the cryptocurrency XRP, which uses blockchain technology to facilitate instantaneous financial transactions. The SEC’s first charged Ripple with violations of securities laws in December 2020 alleging that the company illegally sold unregistered securities through the sale of its XRP tokens, the same suit named both Garlinghouse and Larsen as additional co-defendants.
The company won a partial victory against the SEC in July when a court ruled that Ripple did not violate securities laws when it sold XRP on public exchanges to retail investors. In the same trial, the judge said that Ripple did violate the law when selling XRP directly to institutional clients and called upon a jury to decide if Garlinghouse and Larsen aided the company’s violation of the law. The SEC attempted to appeal the decision but was issued a denial on procedural grounds earlier this month.
In response to the actions taken by the SEC, Ripple Chief Legal Officer Stuart Alderoty said that it was “not a settlement” but “a surrender by the SEC.”
Katherine Kirkpatrick, the chief legal officer for Cboe Digital, said in a post on X, formerly Twitter, that dropping the charges against Garlinghouse and Larsen is potentially a tactic to get the agency’s appeal on the docket faster.
“The SEC has voluntarily dismissed the case against #Ripple senior execs,” wrote Kirkpatrick. “This means they can proceed to appeal the Ripple decision much sooner — otherwise they would have had to wait until the conclusion of that trial in the late spring.”
SEC Chair Gary Gensler has argued that almost all cryptocurrencies must be considered securities and therefore are under the oversight of the regulator and that has led to numerous lawsuits. The agency has cases against other companies including Coinbase Global Inc. and Binance Holdings Ltd. alleging the violations of securities laws. The commission has also sued multiple high-profile individuals including former FTX Trading Ltd. CEO Sam Bankman-Fried and former Celsius Network LLC CEO Alex Mashinsky.
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