On October 19, the Securities and Exchange Commission (SEC) dismissed its claims against Ripple Labs, Inc. (Ripple) executives Bradley Garlinghouse and Christian Larsen for allegedly aiding and abetting Ripple’s violations of the Securities Act with respect to its “institutional sales” of XRP. The Southern District of New York had deemed “institutional sales” to be unregistered securities in its July summary judgment decision, however, at that time the court reserved judgment as to the aiding and abetting claims against the executives. The matter was set for trial in 2024.
The SEC’s filing was made two weeks after its motion for certification of its interlocutory appeal was denied. As discussed here, the SEC had requested leave to file an interlocutory appeal as to the two adverse liability determinations in the court’s partial summary judgment order. In its order, the court held that defendants’ “programmatic” offers and sales to XRP buyers over crypto asset trading platforms and Ripple’s “other distributions” in exchange for labor and services did not involve the offer or sale of securities under the U.S. Supreme Court’s decision in SEC v. W.J. Howey Co. The SEC argued the court misapplied the Howey test to the facts, but the court denied the motion for leave to appeal finding that the SEC’s argument didn’t present issues of pure law and thus wasn’t appropriate for an interlocutory appeal.
With the dismissal of the Ripple executives, the parties will now move forward with a briefing schedule to determine the remedies for the sales of XRP found to violate securities laws.