The United States Securities and Exchange Commission (SEC) has revealed its intention to abandon the lawsuit against Ripple's CEO, Brad Garlinghouse and Executive Chair Chris Larsen.
The SEC made an announcement on October 19th, notifying the US District Court for the Southern District of New York that the claims against Garlinghouse and Larsen would be dismissed "with prejudice."
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The language of the filing indicates that there's no need for a future trial involving the two executives. However, it doesn't mean the SEC is withdrawing its civil case against Ripple.
Stuart Aldeorty, Ripple's chief legal officer, was quick to respond. He described the SEC's latest move as "a surrender," contrasting it with a typical settlement. Ripple released an official statement calling the SEC's change of course a "stunning capitulation."
The regulatory skirmish started in December 2020 when the SEC sued Ripple and its executives, accusing them of violating Section 5 with their sales of XRP tokens. A pivotal moment came in July when a federal judge determined that XRP couldn't be classified as a security when sold to retail investors.
However, the October 19th filing revealed that both the SEC and Ripple are still hashing out what, if any, penalties should be levied against the company for its past institutional sales of XRP. They've requested until November 9th, 2023, to propose a joint briefing schedule to the Court.
On social media, Brad Garlinghouse spoke openly about the ordeal, stating:
Chris and I <...> 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 decade.
Katherine Kirkpatrick, the chief legal officer at Cboe Digital, speculates that the SEC's dismissal could be a strategic maneuver. She suggests that the SEC may be planning to appeal the Court's ruling that classified XRP as a non-security, an action that would likely have had to wait until the trial against Garlinghouse and Larsen had concluded.
It's worth noting that the SEC continues its legal actions against other prominent figures in the crypto world. Alex Mashinsky, the former CEO of Celsius, faces a criminal trial set for September 2024. Meanwhile, Sam Bankman-Fried, the former CEO of FTX, will see his trial resume on October 26th. The SEC has also initiated legal proceedings against major crypto exchanges like Binance and Coinbase.
The SEC's decision to drop charges against Ripple's executives raises more questions than it answers, especially in the complex landscape of cryptocurrency regulations. While the case against Ripple still stands, the ripple effects of this development are likely to be felt throughout the crypto industry.
