In a filing dated 19 October 2023, the Securities and Exchange Commission (SEC) officially dismissed claims against Ripple’s CEO Bradley Garlinghouse and Executive Chairman Christian Larsen.
The regulator previously alleged that Garlinghouse and Larsen:
aided and abetted Ripple’s violations of Section 5 of the Securities Act of 1933 with Ripple’s “Institutional Sales” of XRP.
This follows the summary judgment delivered back in July, which found that Ripple did not violate US Federal securities laws by selling its XRP token on public exchanges and that XRP was not in and of itself a security. However, in the same ruling, the Court identified that Ripple's USD$728.9 million worth of XRP sales to hedge funds and other institutional investors constituted unregistered sales of securities, with a promise to deliver future tokens to those investors.
In respect of this, the filing noted:
SEC and Ripple intend to meet and confer on a potential briefing schedule with respect to the pending issue in the case - what remedies are proper against Ripple for its Section 5 violations with respect to its Institutional Sales of XRP.
SEC has requested a briefing schedule from Ripple by 9 November 2023, noting that in the case of disagreement or absence of submission by the deadline, they will seek a schedule from the Court.
Garlinghouse and Larsen responded to the recent dismissal in a statement, commenting:
For nearly three years, Chris and I have been the subject of baseless allegations…the SEC went after the good guys…who are building a regulated business.
Today, we are legally vindicated and personally redeemed in our battle against a troubling attempt to abuse the rules in order to advance a political agenda to suffocate crypto in America.
SEC’s voluntary dismissal of the claims with prejudice ‘obviates the need for the scheduled trial’ in respect of the individual defendants, reflecting their shifted focus to the main case against Ripple. It follows the regulator’s unsuccessful attempt at an interlocutory appeal and appears to be a strategic move to expedite its appeal on the previous ruling that XRP does not meet the definition of "investment contract" for the purposes of the US Securities Act and therefore is not a security under US federal securities law. Unresolved issues in the Ripple case will be addressed in a trial scheduled April 2024.
Written by K Kim and T Masters