In a groundbreaking turn of events, U.S. District Judge Analisa Torres has taken a decisive step by signing an order to officially dismiss the Securities and Exchange Commission’s case against Ripple executives Brad Garlinghouse and Chris Larsen. This momentous decision was made on October 23, 2023, as the judge emphasized the complete dismissal of the claims against the Ripple leaders with prejudice without incurring any costs.
The recent development comes after the SEC’s announcement to drop charges against Garlinghouse and Larsen. The case originally emerged when, on December 22, 2020, the SEC levied aiding and abetting charges against these executives. The SEC alleged that they had raised capital to finance Ripple through the sale of XRP to institutional investors and conducted unregistered personal sales of XRP amounting to around $600 million.
The core allegation in the complaint asserted that the defendants failed to register their XRP offers and sales or meet any registration exemptions, thereby violating federal laws. However, it’s important to note that the charges were primarily linked to Ripple’s institutional sales of XRP.
SEC’s Categorization of Ripple’s XRP Sales
Previously, the SEC categorized Ripple’s XRP sales into three segments: institutional, programmatic, and other distributions. According to the regulator, these transactions violated Section 5 of U.S. laws. Notably, Judge Torres’ landmark ruling declared that Ripple had only violated the law by selling XRP to institutional investors. She ruled that programmatic sales and other distributions did not constitute the sale of investment contracts.
The case against Ripple executives was linked to the institutional sales of XRP. Judge Torres classified these sales as investment contracts, and this part of the lawsuit was initially set to go to trial next year. However, there has been a recent development in the case, as the SEC has dropped its charges against Garlinghouse and Larsen. As a result, the trial will no longer take place.
The dismissal of the case has ignited speculation within the cryptocurrency community, especially among legal analysts, regarding the next course of action. A prevailing opinion, including that of Attorney Fred Rispoli, is that a settlement is increasingly likely. According to Rispoli, negotiations are underway to determine the settlement amount Ripple will need to pay to resolve the case.
Alternatively, the SEC can appeal after Judge Torres issues the final judgment. It’s worth noting that the SEC previously attempted to file an immediate appeal, challenging a summary judgment decision made on July 13.
However, the court denied the request to certify an interlocutory appeal, instructing the commission to await the final judgment. By dropping charges against Garlinghouse and Larsen, the SEC now has the option to appeal sooner, although this can only take place after the court enters the final judgment, a step that occurs after the remedies stage.
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