Key Takeaways
- Brad Garlinghouse and Chris Larsen contemplated dissolving Ripple following the SEC’s 2020 legal action
- The company’s leadership explored distributing XRP reserves among shareholders before deciding to fight
- Legal defense costs reached approximately $150 million across four years of litigation
- A 2023 court decision by Judge Analisa Torres determined XRP traded on public markets does not qualify as a security
- The company remains subject to a $125 million fine and limitations on enterprise-level XRP transactions
Ripple’s chief executive Brad Garlinghouse disclosed in a recent appearance that he and company co-founder Chris Larsen contemplated dissolving the enterprise following the Securities and Exchange Commission’s lawsuit filing in December 2020.
During an address at the University of Kansas School of Business, Garlinghouse acknowledged that both executives gave serious consideration to terminating business operations and allocating the company’s XRP reserves to shareholders through proportional distribution. He characterized this course of action as the less complicated alternative, particularly considering the SEC’s substantial regulatory authority and financial resources.
Ultimately, the shutdown scenario was abandoned due to concerns about eliminating employment for hundreds of workers. Garlinghouse emphasized that choosing to mount a legal defense was far from straightforward during that period. “Looking back, I’m satisfied with our choice, though it wasn’t clear-cut then,” he stated.
These comments became public knowledge on July 12 through Wu Blockchain, reigniting discussion about Ripple’s internal deliberations during the initial phase of the litigation.
Financial Impact and Legal Accusations
The Securities and Exchange Commission alleged that Ripple, along with Garlinghouse and Larsen, engaged in unregistered securities offerings through XRP transactions. According to the regulatory body, these activities generated over $1.3 billion in capital.
Garlinghouse recounted having four separate meetings with SEC representatives spanning 2017 through 2019. He emphasized that legal counsel was absent from these discussions and that no indication was provided suggesting XRP might be classified as a security. This background influenced his determination to challenge the charges.
The legal battle consumed roughly $150 million over a four-year period. The litigation created significant obstacles for Ripple’s domestic partnerships, limited institutional client engagement, and disrupted standard business functions.
Judge Analisa Torres delivered a divided opinion in July 2023. Her ruling established that XRP transactions conducted through public exchanges did not constitute securities law violations. Conversely, she determined that direct transactions with institutional purchasers did violate such laws.
The judicial order mandated a $125 million civil fine and prohibited the company from conducting future unregistered institutional transactions.
Settlement Negotiations and Final Resolution
Ripple and the SEC pursued settlement discussions regarding outstanding matters in 2025. Their joint proposal sought to reduce the financial penalty to $50 million while eliminating the injunction requirement.
Judge Torres declined this request, explaining that a conclusive judgment had been formalized and could not be modified through such means. Subsequently, both parties withdrew their appeals, leading the Second Circuit to officially close proceedings on August 22, 2025.
The $125 million monetary penalty and restrictions on institutional transactions remained enforceable following case closure.
International Growth Strategy
Ripple obtained comprehensive Markets in Crypto-Assets regulatory approval in Luxembourg, enabling the provision of compliant services throughout the European Economic Area.
This authorization provides the organization with more definitive operational parameters in Europe compared to the United States, where cryptocurrency asset regulations continue undergoing congressional deliberation.
The revelation regarding potential shutdown demonstrates the significant influence the SEC litigation exerted on Ripple’s strategic trajectory and financial position over multiple years. While the company maintained operations, preserved its workforce, and pursued international expansion, certain legal constraints from the final judgment continue to apply.
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