During an interview at the Consensus 2022, Ripple CEO Brad Garlinghouse explained his reasons for going to trial against the SEC. In addition, he commented: “When everything is up and done, we will have spent over $100 million in legal fees to fight the SEC.” He also explained that his battle against the SEC is not individualistic, it is for the entire industry.
On December 22, 2020, he appears in the Manhattan courts demand. The US Securities and Exchange Commission (SEC) sued Ripple and two of its directors (Christian Larsen and Brad Garlinghouse). The commission alleges that Ripple defrauded investors by not providing them with all the information of an undeclared asset sale for $1.3 billion and because of this, the retailers were in a commercially unfavorable position. Since then, the trial for the Ripple lawsuit has been held and has not ceased to cause a stir.
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Ripple continues with its defense
From internal reports on Bitcoin and Ethereum, where the SEC expresses that they cannot be active due to their decentralization, to emails and information about the company itself.
In a public decision, Chief Justice Sarah Netburn of the Southern District of the District Court of New York told the SEC that she can no longer claim that the document in question and the emails associated with it are “privileged documents». Which means that Ripple’s legal team will be able to use them as evidence in the case.
Ripple is accused mainly for the sale of undeclared securities for $1.3 billion, at the same time according to the SEC they compromised the position of retailers with this sale.
Garlinghouse’s reasons for fighting the SEC
During Consensus 2022, Garlinghouse commented that “The SEC abuses small companies that are settling down because they can’t afford a fight against them”. In addition, he explained that his struggle “It’s not just for Ripple, it’s for the entire industry”. Thanks to the fact that Ripple is not exactly a small company, it has been able to go to a trial with the SEC. Garlinghouse’s estimates amount to more than $100 million in fees during the entire legal dispute.
For Garlinghouse, the battle could clarify the landscape regarding what the SEC considers a cryptocurrency or a security. In case it continues to be considered a security, as the SEC alleges, Ripple and XRP will have to adhere to much stricter laws.
What exactly is a currency and what is a security?
Garlinghouse explains that the SEC has never drawn a very clear line on how they classify a security and a currency. And that it is not possible for the United States to become a competitive market in cryptocurrencies without a clear line of what the SEC considers a currency or a security.
Ripple General counsel Stuart Alderoty, thinks that the timeline is very important in the case. Since first the XRP ledger was created, then the 100,000 million XRP and later Ripple. After Ripple was founded, a part of the 100,000 million was donated and this was not made as an investment.
In addition, for Alderoty it is relevant to highlight that at no time has Ripple sold XRP as part of an investment contract. Which would delegitimize the SEC’s accusation, by saying that XRP should be listed as a security.
However, the court has not issued a verdict and is expected to do so in the coming months between August and November. This will determine whether or not Ripple can continue to operate on US territory. In addition, it could establish a clear basis on which other cryptocurrencies and exchanges will be able to operate in the territory.