US SEC Drops Claims Against Ripple Executives in Landmark Cryptocurrency Lawsuit

In a significant development, the United States Securities and Exchange Commission (US SEC) has decided to withdraw its allegations against two high-ranking executives from Ripple Labs. This decision, which unfolded in a New York courtroom on Thursday, marks a pivotal moment in the lawsuit against the blockchain company, where the SEC had accused Ripple of violating U.S. securities law.

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In a significant development, the United States Securities and Exchange Commission (US SEC) has decided to withdraw its allegations against two high-ranking executives from Ripple Labs. This decision, which unfolded in a New York courtroom on Thursday, marks a pivotal moment in the lawsuit against the blockchain company, where the SEC had accused Ripple of violating U.S. securities law.

The regulatory agency, in a court filing, formally declared that it is relinquishing its claims against Ripple's Chief Executive, Brad Garlinghouse, and co-founder Chris Larsen. These claims revolved around accusations that Garlinghouse and Larsen facilitated and abetted the sales of the cryptocurrency XRP, which a judge had previously determined to constitute unregistered sales of securities. This legal battle commenced with the SEC's lawsuit in December 2020, alleging that Ripple unlawfully raised over $1.3 billion through an unregistered securities offering involving the sale of XRP.

In a notable turn of events, U.S. District Judge Analisa Torres, residing in Manhattan, granted Ripple a partial victory earlier in July, stating that the XRP sales on public exchanges did not fall under the purview of unregistered securities offerings. The SEC's request to challenge this ruling was subsequently denied by Judge Torres. However, she did side with the SEC on a different aspect, affirming that the company's sales of $728.9 million worth of XRP to hedge funds and sophisticated investors were in violation of the law.

The allegations against Garlinghouse and Larsen pertaining to their roles in these sales were slated to undergo trial by a jury. Both executives, who have openly criticized the SEC throughout the case, issued extensive statements asserting that the agency had a political agenda aimed at stifling cryptocurrency within the United States.

Garlinghouse, in particular, claimed that the SEC was targeting the "good guys" while ignoring the "criminals" involved in offshore exchanges that had been pursuing political favour. This statement appeared to allude to the trial of Sam Bankman-Fried, the founder of the crypto exchange FTX, who is facing accusations of a $10 billion fraud, with testimony in the trial suggesting that some funds were utilized for political contributions.

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As the case proceeds, the SEC has declined to offer any comments on these recent developments. The next phase in the litigation will involve both parties presenting their arguments to determine the appropriate penalties for Ripple.

This decision by Judge Torres in July represented a rare setback for the SEC, which has been actively pursuing regulatory actions against the cryptocurrency industry. Under the leadership of SEC Chair Gary Gensler, the agency has initiated legal proceedings against Binance, the world's largest cryptocurrency platform, and Coinbase, the largest U.S. cryptocurrency platform. Gensler has consistently maintained that many digital assets should be classified as securities, falling under the SEC's regulatory jurisdiction. However, industry participants have strongly argued that the current U.S. securities laws are ill-suited for the crypto landscape and have actively advocated for new regulatory frameworks.