In the lawsuit against blockchain company Ripple, the U.S. Securities and Exchange Commission (SEC) has filed a court document in New York, revealing its decision to withdraw allegations against two Ripple Labs executives.
The SEC stated in its court filings that it is relinquishing its claims that Ripple’s Chief Executive Brad Garlinghouse and co-founder Chris Larsen assisted and facilitated the sales of the cryptocurrency XRP, which a judge previously determined constituted unregistered securities sales.
“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—and respectfully request until November 9, 2023, to propose such schedule to the Court or, if the parties cannot agree, to seek a briefing schedule from the Court on a contested basis,” stated the filing.
In its lawsuit filed in December 2020, the SEC alleged that Ripple had unlawfully garnered over $1.3 billion through an unregistered securities offering by selling XRP.
U.S. District Judge Analisa Torres, presiding in Manhattan, provided Ripple with a partial victory in the case in July. She determined that the sales of XRP on public exchanges did not qualify as unregistered securities offerings. Following this decision, Torres turned down the SEC’s request to appeal the ruling.
Additionally, she made a partial ruling in favour of the SEC, affirming that the agency had demonstrated the company’s illicit XRP sales of $728.9 million to hedge funds and other experienced buyers had breached the law.
The SEC’s allegations against Garlinghouse and Larsen, pertaining to their involvement in these sales, were set to be resolved through a jury trial.
Both Garlinghouse and Larsen, who had strongly condemned the SEC’s actions throughout the legal proceedings, released extensive statements alleging that the agency had a political motive, with Larsen asserting that it aimed to “suffocate crypto in America.”
“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 favour, the SEC went after the good guys.”
According to the documents filed by the agency, the next phase in the case involves both parties presenting their arguments to the judge regarding the appropriate penalty for Ripple.
Judge Torres’ ruling in July, which favoured Ripple, marked a rare setback for the SEC in its ongoing efforts to regulate the cryptocurrency industry.
Under the leadership of SEC Chair Gary Gensler, the agency has initiated legal actions against Binance, the world’s largest cryptocurrency platform, and Coinbase (COIN.O), the largest cryptocurrency platform in the United States.
Gensler has expressed the view that many digital assets should be considered securities and therefore fall under the regulatory jurisdiction of the SEC.
Members of the cryptocurrency industry have contended that existing U.S. securities laws are impractical when applied to crypto and have advocated for the introduction of new regulations.
