Ripple CEO Discloses Company Was on Brink of Closure After 2020 SEC Action

Key Takeaways

• Brad Garlinghouse and Chris Larsen contemplated dissolving Ripple following the SEC’s 2020 lawsuit
• Leadership considered distributing the company’s XRP reserves among shareholders before abandoning the idea
• The legal defense cost Ripple approximately $150 million across a four-year period
• A 2023 judicial decision by Judge Analisa Torres determined that XRP traded on public markets does not constitute a security
• The company continues to operate under a $125 million fine and limitations on selling XRP to institutional buyers

Ripple’s Chief Executive Officer Brad Garlinghouse disclosed during a recent appearance that he and company co-founder Chris Larsen nearly made the decision to dissolve the entire organization following the December 2020 lawsuit filed by the U.S. Securities and Exchange Commission.

During his presentation at the University of Kansas School of Business, Garlinghouse explained that both executives engaged in substantial deliberations about terminating business operations and allocating Ripple’s XRP reserves to shareholders based on proportional ownership. He characterized this approach as the simpler alternative, particularly considering the SEC’s vast authority and financial resources.

Ultimately, the executives abandoned this plan because implementation would have eliminated employment for hundreds of workers. Garlinghouse acknowledged that choosing to mount a legal defense was far from a clear-cut decision during those uncertain times. “Looking back now, I’m relieved we fought, but that clarity didn’t exist then,” he stated.

These comments became public knowledge on July 12 through Wu Blockchain, generating renewed interest in the internal discussions that occurred at Ripple during the initial months following the legal action.

Understanding the SEC Case and Its Financial Impact

The Securities and Exchange Commission alleged that Ripple, along with Garlinghouse and Larsen, engaged in offering unregistered securities through XRP transactions. According to the regulatory agency, Ripple generated over $1.3 billion from these alleged violations.

Garlinghouse recounted meeting with SEC representatives on four separate occasions spanning 2017 through 2019. He emphasized that legal counsel was never present during these meetings, and officials never indicated that XRP might be classified as a security. This history influenced his determination to challenge the allegations in court.

The company allocated approximately $150 million toward legal expenses throughout the four-year litigation. The case created significant obstacles for Ripple’s domestic partnerships, restricted institutional client engagement, and complicated routine business functions.

Judge Analisa Torres delivered a divided verdict in July 2023. Her ruling determined that XRP transactions conducted through public cryptocurrency exchanges did not violate securities regulations. Conversely, she concluded that direct transactions with institutional purchasers did constitute violations.

The judicial order imposed a $125 million civil fine on Ripple and prohibited the company from conducting future unregistered institutional sales.

Resolution Negotiations and Final Outcome

Ripple and the SEC pursued a settlement agreement in 2025 to resolve outstanding matters. Their joint proposal sought to reduce the penalty to $50 million while eliminating the injunction against institutional sales.

Judge Torres declined to approve the settlement request. She determined that a final judgment had been formally entered and could not be modified through this process. Subsequently, both parties withdrew their respective appeals, and the Second Circuit officially closed the matter on August 22, 2025.

The $125 million financial penalty and the prohibition on institutional sales without proper registration remained enforceable following case closure.

International Growth Strategy Moves Forward

Ripple obtained comprehensive Markets in Crypto-Assets regulatory approval in Luxembourg, enabling the organization to provide compliant services throughout the European Economic Area.

This authorization establishes a more defined regulatory environment for Ripple’s European operations compared to the United States, where comprehensive digital asset legislation continues undergoing congressional deliberation.

The revelation about the company’s near-closure demonstrates the profound impact the SEC litigation had on Ripple’s strategic direction and financial position over multiple years. While the organization survived the ordeal, maintained its workforce, and pursued international expansion, certain legal constraints from the final ruling continue to affect operations.

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