Sued by the SEC, Ripple Nearly Closed and Distributed XRP to Shareholders

JAKARTA - Ripple almost closed the company when the United States Securities and Exchange Commission or SEC sued it in 2020. The company's XRP ownership was even considered to be distributed to shareholders.

CoinDesk quoted Monday, July 13, saying that Ripple CEO Brad Garlinghouse and one of its founders, Chris Larsen, seriously discussed the option before finally deciding against the SEC lawsuit.

Garlinghouse revealed this when speaking at the School of Business, University of Kansas, earlier this week. According to him, dissolving Ripple is an easier way than facing a government that has almost unlimited power and resources.

Ripple has a large amount of XRP. The asset can be distributed proportionally according to the shareholding portion, then the company is dissolved.

The dissolution was considered to end the case because Ripple was no longer operating. However, Garlinghouse and Larsen eventually chose to survive because the closure of the company would eliminate hundreds of jobs.

"Looking back, I'm glad we made that decision. However, at the time the choice was not clear," said Garlinghouse.

The SEC sued Ripple in 2020 on allegations that the company sold XRP as an unregistered security. Securities are investment assets whose offerings and trading are subject to capital market laws.

The lawsuit also names Garlinghouse and Larsen personally.

Garlinghouse said he met with SEC officials four times between 2017 and 2019 without being accompanied by a lawyer. According to him, during the meeting the SEC never conveyed that XRP might be treated as a security.

This makes Garlinghouse assess that Ripple did not get clear rules before the lawsuit was filed.

The legal battle lasted about four years. Garlinghouse estimates that Ripple spent $150 million on legal fees.

Ripple then obtained a significant ruling when Judge Analisa Torres declared XRP on its own not a security.

The two sides reached a settlement in May last year after the Donald Trump administration appointed a new SEC leader who took a softer approach to the crypto industry.