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Ripple’s top leaders are cleared in the SEC’s securities-violation accusations that have spent years winding their way through federal courts, bringing the overall case closer to an initial conclusion – and potentially closer to an appeal.
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The case is seen as one of the bellwethers in the ongoing dispute between the crypto industry and SEC in what defines a security.
The U.S. Securities and Exchange Commission (SEC) will no longer pursue claims that Ripple’s CEO Brad Garlinghouse or Executive Chairman Chris Larsen aided and abetted the company in violating federal securities laws in its XRP transactions, canceling a trial scheduled for next year and giving the crypto company another victory in the agency’s long-running suit against it while moving the regulator closer to appealing a federal judge’s ruling in the case.
According to a filing Thursday afternoon, the parties agreed to voluntarily dismiss the aiding and abetting charges against the two executives with prejudice, meaning it cannot be filed again. The SEC will continue pursuing its claims against Ripple, the filing said.
“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 won a major – if partial – victory in July, when the judge overseeing the case ruled that the company had not violated federal securities laws in making XRP available to retail investors by putting it on exchanges. In the same ruling, Judge Analisa Torres said the company had violated federal securities law in selling XRP directly to institutional investors.
It’s this second part where the SEC and Ripple will continue discussions, Thursday’s filing indicated. Similarly, the dropped charges are tied to the institutional sales, which would have gone on trial next April.
“The 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,” the filing said.
An SEC spokesperson declined to comment. A Ripple press release described the filing as a “surrender” and the original pursuit as “absurd theatrics.”
The price of XRP jumped about 4.1% on the news, to $0.51.
Earlier this month, an attempt by the SEC to appeal its court loss in the Ripple case while the other issues continued through the trial process was denied.
The SEC has experienced a series of litigation setbacks in its wide-ranging pursuit of crypto firms it says are violating securities laws. SEC Chair Gary Gensler has argued that virtually all cryptocurrencies should be considered securities in the jurisdiction of agency oversight, but U.S. judges have repeatedly declared it’s not so simple.
In the near-term absence of crypto regulatory laws from Congress, these court battles may end up setting the U.S. standards by which the government approaches digital assets.
In the meantime, Ripple said it’s now doing almost 90% of its business beyond the U.S. borders.
Katherine Kirkpatrick, the chief legal officer for Cboe Digital, said in a post on X (formerly Twitter) that the agency may have dropped the cases against the individuals as a legal tactic.
“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,” she wrote.
Read More: SEC Sues Ripple Over 7-Year, $1.3B ‘Ongoing’ XRP Sale
UPDATE (October 19, 2023, 21:18 UTC): Adds comment from CEO Brad Garlinghouse.
UPDATE (October 19, 2023, 21:38 UTC): Adds XRP price.
UPDATE (October 19, 2023, 21:52 UTC): Adds a decline-comment from the SEC and adds comment from Cboe Digital lawyer.
UPDATE (Oct. 19, 2023, 23:56 UTC): Adds additional context, clarifies details.