Fox Business journalist Eleanor Terrett says even though the SEC dropped the charges against Ripple execs; the regulator is not letting go of other parts of the case.
It is no longer news that the U.S. SEC has dropped the charges against Ripple executives Bradley Garlinghouse and Chris Larsen. The development prompted members of the crypto community to speculate that the lawsuit would soon be concluded.
Gensler Not Going Down Without a Fight
However, the SEC may be preparing for another round of litigation. According to an update shared by Fox Business journalist Eleanor Terrett, SEC chair Gary Gensler is not willing to let go of the Ripple case without a fight.
Citing sources close to the SEC, Terrett said the commission is not considering dropping other parts of the case, especially its classification of all offers and sales of XRP as a security.
“Sources close to the @SECGov tell me that while the charges against @bgarlinghouse and @chrislarsensf have been dropped, all other parts of the case, including classification of all offers and sales of $XRP as an investment scheme, remain on the table,” Terrett noted.
?NEW: Sources close to the @SECGov tell me that while the charges against @bgarlinghouse and @chrislarsensf have been dropped, all other parts of the case, including classification of all offers and sales of $XRP as an investment scheme, remain on the table.
Seems @GaryGensler…
— Eleanor Terrett (@EleanorTerrett) October 20, 2023
SEC’s Classification of Ripple’s XRP Sales
For context, on December 22, 2020, the SEC charged Ripple and two of its executives with conducting unregistered securities offerings through the sales of XRP to investors in the U.S. and worldwide.
“The SEC charges defendants with violating the registration provisions of the Securities Act of 1933 and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties,” the regulator noted.
The SEC classified Ripple’s XRP sales into three distinct categories: institutional sales, programmatic sales on digital exchanges, and other distributions.
In the first category, the SEC alleged that Ripple’s direct past sales of XRP to institutional clients constitute an investment contract. The regulator also alleged that programmatic sales of XRP and other distributions also constitute securities.
During the July 13 summary judgment, Judge Analisa Torres found that Ripple only violated securities law by selling XRP to institutional investors. However, the court ruled that Ripple’s programmatic sales of XRP and other distributions did not constitute an investment contract.
Aggrieved by the ruling, the SEC sought permission to certify an interlocutory appeal in order to challenge the court’s decision on programmatic sales of XRP and other distributions.
As reported earlier, the court denied this request, ordering the SEC to wait until all pending charges have been resolved. With the SEC dropping the charges against Ripple execs, the remedies stage is the only pending issue in the case before the court will issue its final judgment.
A Possible Appeal or Settlement?
Since the SEC is not willing to drop other parts of the case, the regulator could be heading to the Second Circuit after the penalty phase has been sorted.
The SEC could use other parts of the case as a bargaining chip in order to get a sizable check from Ripple during a potential settlement.
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