246 Interactions, 2 today
Judge Sarah Netburn ruled a few days earlier that Ripple executives Brad Garlinghouse and Chris Larsen’s personal financial statements are largely meaningless and out of proportion to the needs of the court. As a result, Garlinghouse and Larsen have filed twin requests to dismiss the SEC’s case.
In particular, the motions to dismiss listed above were followed by separate claims brought by the executives’ respective counsels.
According to the memorandum of law filed by Garlinghouse’s counsel Matthew Solomon,
“The second claim fails because the AC does not plausibly allege that Mr. Garlinghouse knew or was reckless in not knowing that Ripple was violating Section 5 or was acting improperly.”
Solomon also suggested that the SEC’s theory that Garlinghouse behaved “recklessly” is a high bar to justify, one that is refuted and disproved by the executive’s own conduct, as the agency said, “[he] was focused on ensuring that XRP did not even appear to have the features of a security.” He continued,
“The thrust of the SEC’s allegations seem to be that Mr. Garlinghouse was aware that some digital assets – not XRP – could be considered securities, but that he took steps to ensure that XRP could not be perceived as a security. But recognizing and seeking to avoid a risk is not reckless – it is prudent.”
Concerning the first claim, Garlinghouse’s counsel argued that it fails the legal test since the AC does not allege that the exec’s XRP transactions or personal offers occurred in the United States, particularly because “the registration requirements of the Securities Act apply only to domestic sales of securities.”
Similar arguments were made by Larsen’s attorney in the memorandum of law accompanying his own motion to dismiss. Like the aforementioned, the document filed by Martin Flumenbaum also asserted that the SEC’s charges against the Ripple exec shouldn’t stand before law since,
- Amended complaint fails to plausibly allege recklessness
- SEC fails to allege any sales were domestic
- SEC fails to allege any offers were domestic
- SEC’s claims for monetary relief are time-barred
The SEC now has until May 14th to file claims opposing Larsen and Garlinghouse’s motions to dismiss.
Ripple Labs was charged with selling unregistered securities offers by the SEC in December. However, in an extraordinary move, it also sued the executives of the blockchain company.
With the general opinion being that both sides would be unable to agree on the subject, many in the crypto-community are eagerly awaiting the decision in the aforementioned event. While many agree that a decision that is unfavourable to Ripple would have serious ramifications for the rest of the industry, a decision that is favourable to Ripple is likely to spur additional development. In reality, the price of XRP, the cryptocurrency at the centre of the aforementioned litigation, recently increased.