On Thursday, October 19, the US Securities and Exchange Commission (SEC) cleared Ripple executives – CEO Brad Garlinghouse and Executive Chairman Chris Larsen – of all charges in the lawsuit.
This is the third major victory for Garlinghouse and his team since the first court ruling in July 2023. The SEC had alleged that Larsen and Garlinghouse deceived investors regarding XRP by vending over $1 billion worth of these digital coins without proper registration. In July, US District Judge Analisa Torres determined that XRP qualified as a security when directly sold to institutions but not when made available to the public on cryptocurrency exchanges.
Earlier this month, Torres rejected the SEC’s request for an expedited appeal of her verdict. The Ripple case has posed a major challenge to the SEC which thinks that most digital tokens are securities. However, several players from the crypto space have challenged the SEC’s decisions over crypto securities. Speaking on the current development, Ripple CEO Brad Garlinghouse said:
“For nearly three years, Chris and I have been the subject of baseless allegations from a rogue regulator with a political agenda. Instead of looking for the criminals stealing customer funds on offshore exchanges that were courting political favor, the SEC went after the good guys – along with our entire company of innovators and entrepreneurs – who are building a regulated business based in the US We look forward to the day this chapter is closed once and for all, now that the SEC has dropped the curtain on their absurd theatrics against Chris and me.”
SEC on the Backfoot
Elliott Stein, an analyst at Bloomberg Intelligence, commented on the SEC’s recent action, noting that it provides the agency with an opportunity to expedite its appeal against the aspects of the case it lost, rather than proceeding with a trial against the individuals. Stein speculated that the SEC aimed to prevent unfavorable information from emerging during the trial, which could potentially undermine the SEC’s previous victory regarding direct institutional sales.
In response to the SEC’s move, Ripple issued a statement characterizing it as a “remarkable surrender by the government”. Speaking on the development, Ripple’s chief legal officer Stuart Alderoty said:
“This is not a settlement. This is a surrender by the SEC.”
Christian Schultz, a former SEC attorney who currently serves as a partner at Arnold & Porter explained the reason behind the SEC’s decision. The dismissal of the case could likely be the desire to prevent any delay in the appeal of the SEC’s claims against Ripple and the executives, as these claims were rejected by Judge Torres on summary judgment.
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