Ripple sale on public exchanges did not involve securities, judge rules
Ripple has dramatically won a partial victory against the US Securities and Exchange Commission in its lengthy battle with the government agency.
A judge today ruled Ripple Labs Inc’s sales of its XRP token on public exchanges did not involve securities.
The court did, though, judge that it violated federal securities law in XRP sales directly to sophisticated investors.
Ripple and its founders stood accused of conducting a $1.3 billion unregistered securities offering by selling XRP.
US District Judge Analisa Torres ruled the 11-year-old company’s $728.9 million of XRP sales to hedge funds amounted to unregistered sales of securities.
However, Judge Torres explained XRP sales on public exchanges were not offers of securities under the law, owing to the fact that purchasers did not have a reasonable expectation of profit tied to Ripple’s efforts.
She described those sales as “blind bid/ask transactions”, adding the buyers “could not have known if their payments of money went to Ripple, or any other seller of XRP”.
Sales of XRP on crypto platforms by Ripple’s CEO Brad Garlinghouse and former CEO Chris Larsen, together with further distributions – including compensation to employees – also did not involve securities, she said.
Concluding, Judge Torres said a jury must now make the decision on or not Garlinghouse and Larsen had aided the company’s violation of law.