There have been speculations that the US Securities and Exchange Commission (SEC) could drag Ripple Labs’ founders into the regulator’s long-running legal battle against their company. However, pro-XRP legal expert Fred Rispoli has outlined why this is unlikely.
SEC Unlikely To Sue Ripple Founders
Rispoli stated in a tweet that the SEC is unlikely to pursue a trial against Ripple’s CEO Brad Garlinghouse and Executive Chairman Chris Larsen for “many reasons.”
The agency had accused Ripple Labs of selling unregistered securities back in 2020. But although it highlighted Garlinghouse and Larsen as integral to the wrongdoing, it never brought an action specifically against the duo.
It is not unusual for the SEC to bring actions against top executives whenever it files a suit against a defaulting company. In April this year, the Commission sued crypto exchange Bittrex and its former CEO, William Shihara, for operating an unregistered securities exchange.
However, Rispoli believes that the SEC only threatened a lawsuit against Garlinghouse and Larsen to pressure the company into a “weak settlement position” and did not intend to maintain a suit against them.
He noted that the trial was also unlikely as the SEC would not want a situation where its credibility is questioned, which he believes could happen if former SEC Chair Jay Clayton and former SEC Director William Hinman are called to the witness stand.
Rispoli’s position may have something to do with the Himman documents, highlighting the agency’s questionable practices and possibly corruption. It is believed that Himman may have been influenced by external forces when he stated that Ether was not a security.
SEC Has A Weak Case
As part of his arguments as to why the SEC is unlikely to sue Garlinghouse and Larsen, Rispoli stated that the Commission will find it hard to prove that the executives were reckless in terms of institutional sales as they can raise a defense that these sales were programmatic (something which Judge Torres had ruled didn’t constitute an investment contract).
The lawyer further highlighted that the SEC doesn’t have sufficient evidence to differentiate between domestic and international sales when putting forward its case.
Rispoli noted that the regulator just reorganized most of its trial team, which could signify that it doesn’t have enough manpower to handle an additional lawsuit involving Garlinghouse and Larsen.
The SEC had moved to file an interlocutory appeal following Judge Analisa Torres’ ruling in favor of Ripple Labs. But Rispoli believes this is a “Hail Mary” move from the Commission as it had no “bargaining chips” left if the appeal had not been approved.
