Cleary Gottlieb represented Brad Garlinghouse, the CEO of Ripple Labs Inc. (Ripple), in successfully obtaining the dismissal with prejudice of the claim by the SEC that he aided and abetted certain of Ripple’s offers and sales of XRP, the native digital asset of the XRP Ledger, a public blockchain.
By dismissing this claim, the SEC abandoned a trial that was slated to begin in April 2024. This follows Mr. Garlinghouse’s successful summary judgment motion with the Court dismissing all of the primary liability claims against him. He now has the full dismissal of all of the SEC’s claims against him.
Ripple is an enterprise crypto and blockchain technology company building a regulated global payment network to avoid the costly and cumbersome existing centralized bank settlement process and instead allows payments to flow in real time across borders using XRP. Mr. Garlinghouse joined Ripple in April 2015 and was announced as CEO in November 2016. On December 22, 2020, the SEC filed a lawsuit in the Southern District of New York against Ripple, its CEO Brad Garlinghouse, and its former CEO and current Executive Chairman Christian Larsen, alleging that they engaged in an eight-year unregistered securities offering of XRP. The SEC also alleged that Mr. Garlinghouse and Mr. Larsen aided and abetted Ripple Labs’ offers and sales of XRP. There were no allegations of fraud.
On July 13, 2023, Judge Analisa Torres of the Southern District of New York granted defendants’ motion for summary judgment as to all of Mr. Garlinghouse’s personal sales of XRP and Ripple’s “programmatic” sales of XRP on digital asset exchanges. The Court also denied the SEC’s motion for summary judgment against Mr. Garlinghouse on the aiding and abetting claim, setting up a highly anticipated trial on this claim for April 2024. On October 3, 2023, the Court denied the SEC’s motion for leave to appeal and to stay the trial.
Rather than attempting to prove its claims at trial, the SEC voluntarily dismissed the sole remaining claim against Mr. Garlinghouse on October 19, 2023. All claims against Mr. Garlinghouse have now been dismissed, resulting in a rare victory for an individual defendant over the SEC in a litigated case.
“This case was approved in the waning days of the former chairman’s tenure,” Cleary partner Matt Solomon said. “We always believed that the case was meritless, and that the SEC compounded its error by personally targeting Brad, who did absolutely nothing wrong. The Court was right to dismiss the core of the SEC’s case this summer. Faced with the prospect of having to prove its remaining claim against Brad in court, the agency was right to abandon it.”