Ripple's Chris Larsen Files Motion to Dismiss SEC Case Over XRP Sales

Larsen's lawyers say the SEC has failed to show he knowingly committed any wrongdoing.

AccessTimeIconMar 4, 2021 at 9:28 a.m. UTC
Updated Sep 14, 2021 at 12:21 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Ripple's executive chairman has asked a U.S. court to dismiss a U.S. Securities and Exchange Commission (SEC) lawsuit alleging securities violations relating to sales of the XRP cryptocurrency.

According to a legal letter informing Judge Analisa Torres at the U.S. District Court for the Southern District of New York of a motion to dismiss, lawyers say the SEC's amended complaint "still fails to state a claim against Mr. Larsen."

In December, the SEC sued Ripple, CEO Brad Garlinghouse and Larsen alleging they had not registered XRP as a security or sought an exemption, and had sold over $1.3 billion in the cryptocurrency to retail investors.

The central claim centers on Larsen having "knowingly or recklessly provided substantial assistance to another person in violation of [Section 5]” of the Securities Act 1933, according to the amended complaint filed last month.

On those grounds, Larsen's lawyers contend the SEC failed to show that Larsen knew at the time XRP units were securities and Ripple's activities were inappropriate. They make various points to back this up, including that the Justice Department and FinCEN considered and regulated XRP as a "virtual currency" – a fact inconsistent with it being a security.

"The SEC’s own allegations are not only deficient but affirmatively show it cannot meet this standard," the letter reads. "At a minimum, the SEC must allege that it was 'so obvious' that XRP transactions were securities and Ripple’s conduct was improper that Mr. Larsen 'must have been aware of it.'"

The lawyers also argue the regulator fails to demonstrate Larsen had provided "substantial assistance" to Ripple in carrying out its sales of XRP, or that Larsen's XRP transactions were within the U.S. and hence within its jurisdiction.

"This deficiency is fatal to the Section 5 claim against Mr. Larsen," according to the letter. "To plead a Section 5 violation, the SEC must adequately allege that each sale occurred within the territorial reach of Section 5."

The letter also alleges the SEC's claim for monetary relief is time-barred, having gone beyond the allotted period to pursue a claim under Section 5.

"Because the SEC has alleged that the sales of XRP over a multi-year period constituted only one offer ... the statute of limitations began to run in 2013 and expired in 2018," the letter reads.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.