Three Years Before SEC Lawsuit, Ripple CTO Said Company Could Sell Its 54B Escrowed XRP to Fund Lawsuits

A clip recently surfaced featuring a speech from the Ripple CTO in which he reportedly said Ripple could sell off its escrowed XRP to defend itself against lawsuits.

In a surprising turn of events, a clip from 2017 suggests Ripple might have intentions of selling off the billions of XRP in its escrow wallets to fund lawsuits when necessary. The clip reportedly featured a speech from David Schwartz, Ripple’s CTO.

The clip, taken from a recording of CoinDesk’s 2017 Consensus event, was recently brought to public attention by PlanXRP, an XRP community-driven channel. 

Ripple to Sell XRP Escrow to Pay for Lawsuit?
– David Schwartz, Consensus 2017
(3-years before the lawsuit)#XRP #Ripple #david #schwartz #consensus #bitcoin #lawsuit #SEC pic.twitter.com/QlAcAVnLwd

— PlanXRP (@TheTruth_XRP) July 5, 2023

In the video, David Schwartz is observed speaking on the 54 billion XRP tokens stashed in Ripple’s escrow wallets. According to him, the fact that Ripple is funded by venture capital firms allows the company to use the escrow wallets strategically rather than like bank accounts.

This means the company can reserve the escrowed XRP tokens for strategic spending instead of primarily using them to fund business operations like salary payments. One such strategic use case is to fund a defense against lawsuits.

Schwartz remarked: “You can imagine we’re going to act in our own interest if we were threatened, and we had to draw on that. We certainly would, to protect, hopefully, the space, as much as we would protect us. We’re going to act in our own interest.”

The Ripple CTO emphasized that Ripple doesn’t have to leverage the escrowed tokens to pay salaries. Instead, they could use the tokens to provide incentives, especially for institutional buyers.

He noted: “We can use it to align incentives. Institutional buyers who may buy XRP with a lockup, they have an aligned incentive with us and other people who hold XRP because the future value of XRP is very important to them.” 

Schwartz confirmed that the escrowed XRP tokens could also serve as a source of revenue for the firm. He stressed that while they could leverage the tokens as a revenue source, the assets are not solely reserved for that purpose.

“If we succeed, we believe that’s going to put upward pressure on the price. And if we fail, well, we’re going to fail no matter what… you know, if we fail, we fail,” the Ripple CTO added.

XRP Community Reacts

The circulating clip has elicited varied responses from the XRP community, considering that a selloff by Ripple to fund a defense against lawsuits could impact the market. 

Notably, the decision to release batches of the tokens periodically is specifically aimed at avoiding such market impact. Recall that Ripple unlocks 1 billion XRP from escrow every month, with the latest release occurring on July 1.

The 2017 CoinDesk Consensus took place in May 2017. This was two years after the Financial Crimes Enforcement Network (FinCEN) fined Ripple and its subsidiary, XRP II, a total of $700,000 for violations of the Bank Secrecy Act. Ripple settled the charges and agreed to the conditions set up by the agency.

Interestingly, four months after Schwartz’s speech at the 2017 Consensus event, R3 Holdo, a U.S.-based blockchain firm, sued Ripple for violating a mutual agreement between both firms. 

In June 2017, Ripple CEO Brad Garlinghouse sought to terminate a prior contract reached by R3 Holdo and Ripple in September 2016. The contract would give R3 the right to buy 5 billion XRP at $0.0085 per XRP over three years. R3 Holdo argued that Ripple has no right to terminate the contract prematurely.

The SEC lawsuit against Ripple occurred three years after David Schwartz’s speech. Over the years, Ripple has also been caught in several lawsuits. This reality has triggered speculations that the company expected these legal actions.

In addition, allegations and concerns about Ripple’s escrow wallets have also surfaced. Amid these conjectures, Schwartz had not yet commented on the circulating clip as of press time. This has compounded the speculations.