After nearly three years of ongoing legal battles, there’s been a significant development in the civil lawsuit involving the United States Securities and Exchange Commission (SEC), Ripple CEO Brad Garlinghouse, and executive chair Chris Larsen.
On October 19th, lawyers representing the SEC made an announcement that they intend to dismiss all claims against Brad Garlinghouse and Chris Larsen. This development marks a crucial shift in the case, which has been unfolding since December 2020.
The SEC, in its filing to the U.S. District Court for the Southern District of New York, revealed that the involved parties, including Ripple, have reached an agreement for the dismissal of claims with prejudice. This agreement suggests that there is no need for a scheduled trial, but it is essential to note that the SEC has not signaled the abandonment of its civil case against Ripple itself. This case was initially filed in 2020 and revolves around allegations related to Ripple’s XRP tokens, which the SEC claimed to be securities.
In their filing, the SEC and Ripple expressed their intention to discuss a potential briefing schedule regarding the outstanding issue in the case. Specifically, they aim to determine the appropriate remedies for Ripple in light of its Section 5 violations concerning the Institutional Sales of XRP. They have requested until November 9, 2023, to propose this schedule to the court. If a mutual agreement cannot be reached, they will seek a contested basis for the briefing schedule from the court.
Responding to this development, Stuart Alderoty, Ripple’s chief legal officer, characterized the SEC’s decision as a “surrender” rather than a settlement. In a statement, Ripple described the SEC’s move as a “stunning capitulation.”
Brad Garlinghouse took to X (formerly Twitter) to express his sentiments, stating that he and Chris Larsen were unfairly targeted by the SEC in a bid to tarnish their reputations and undermine the company they have diligently built over more than a decade.
Today was an even better day.
— Brad Garlinghouse (@bgarlinghouse) October 19, 2023
Ripple: 3
SEC: 0
In 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
The SEC’s involvement in the Ripple case dates back to December 2020 when the commission initially filed a lawsuit against Garlinghouse, Larsen, and Ripple. The primary focus of this legal battle was the sale of XRP tokens, with the SEC contending that these tokens constituted securities. In July, a federal judge ruled that XRP should not be categorized as a security when sold to retail investors, further adding to the complexity of the case.
The motivations behind the SEC’s decision to drop the charges after almost three years are not entirely clear. The trial had been scheduled to commence in April 2024. Katherine Kirkpatrick, the chief legal officer of Cboe Digital, speculated that the SEC’s move to dismiss the claims against Garlinghouse and Larsen may indicate the SEC’s intent to appeal the court’s decision on XRP as a security. Such an appeal would likely have awaited the conclusion of the trial.
It is noteworthy that the SEC is currently engaged in several other significant cases involving prominent figures within the cryptocurrency space. Notable cases include those against former Celsius CEO Alex Mashinsky, with his criminal trial slated for September 2024, and former FTX CEO Sam Bankman-Fried, whose trial is set to resume on October 26. The commission has also filed civil lawsuits against leading crypto exchanges, Binance and Coinbase. These cases underscore the SEC’s ongoing efforts to establish legal precedents in the evolving world of cryptocurrencies.
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