After five years of litigation with the U.S. Securities and Exchange Commission, crypto company Ripple Labs and its founder, Chris Larsen, are walking away with a far better outcome than they once faced. A possible $2 billion fine if the SEC won on appeal was walked back to $125 million last week, the SEC announced Thursday.
This decision was “a long time coming,” said Larsen by phone.
“That case should’ve never been brought,” he said. “It was designed to destroy the industry, at a time when the government didn’t understand the implications.” The SEC, Larsen added, went after “good actors” in the cryptocurrency industry in previous years, rather than putting up “regulatory guardrails.”
“We obviously think that it’s a really good thing,” he said of the $125 million settlement. “That’s really good for the industry, and really good for the Bay Area.”
San Francisco used to be the crypto capital of the world, he said, and thanks to rulings like these, it’s becoming that again. Coinbase, another San Francisco-based cryptocurrency company that the SEC charged in 2023 with operating as an unauthorized securities exchange, has also said that it is benefitting from the government’s new crypto-friendly attitude.
Ripple is now “on the offense,” said Larsen. It acquired the stablecoin platform Rail for $200 million on Aug. 7, the same day that the SEC announced that it was dismissing its appeal. Rail was the first of many future acquisitions, Larsen said. “We’re looking for others.”
Larsen is one of the biggest political donors in San Francisco. He previously funneled around $1.3 million into the campaigns of former Mayor London Breed and her ballot measures, and his nonprofit Avenue Greenlight contributed $3 million to power-washing street cleaning initiatives under Mayor Daniel Lurie.
But the majority of Larsen’s contributions have gone toward law enforcement surveillance technologies — including a $9.4 million donation to the San Francisco Police Department’s new drone program, and a quarter of a million dollars into the proposition that expanded SFPD’s use of surveillance cameras.
‘Looking down the barrel of a billion-dollar gun’
A major reason for the government’s about-face in the Ripple case, said multiple law professors specializing in financial practices, was that Ripple was able to wait until a favorable government was in power.
“One of the things you can do when you represent a company in a political space is you can wait until a more friendly administration comes in,” said Ilya Beylin, a professor of law at Seton Hall University.
“Whether this is luck, or whether Ripple’s counsel was really waiting for this outcome, we’ll never know,” he continued.
The SEC’s suit against Larsen’s Ripple Labs began in 2020. The SEC argued that Ripple, which manages peer-to-peer transactions through a cryptocurrency called XRP, needed to disclose all tokens as if they were stocks, since the crypto company advertised XRP as an investment.
An Obama-appointed judge in 2023 ruled partially in Ripple’s favor, deciding that XRP does not need to be disclosed as a security when sold to individuals, but it does need to when Ripple sells the token to institutional investors like banks, insurance companies, and endowments. The judge also imposed a $125 million fine.
President Joe Biden’s SEC appealed that decision shortly after, denouncing in a scathing 2024 court document the “egregiousness of Ripple’s misconduct,” and writing that the crypto company had disregarded previous rulings, allowing it to rake in billions of dollars in profits. While the court’s earlier summary judgment asked for $125 million, the SEC sought $2 billion.
“Ripple has not accepted responsibility for its near-decade long violations of the law,” wrote the SEC attorneys.
Larsen previously said that his company did not break the law. Unlike Sam Bankman-Fried — who took advantage of lack of SEC oversight to defraud investors and ultimately was thrown behind bars — this was not a criminal matter and the Department of Justice was not involved. But the SEC’s attorneys under Biden alleged that Larsen’s company still acted illegally, writing that “the evidence establishes that Ripple, in fact, intended to evade the law.”
The Trump administration’s SEC disagreed.
While prior SEC chair Gary Gensler was seen by many in the crypto industry as an adversary, his successor, Paul Atkins, “came in more or less with a mandate to nurture the crypto industry,” said Beylin. Not only that, he continued, Atkins was chosen by President Donald Trump for his crypto-friendly attitude — just recently, Atkins publicly said that “most crypto assets are not securities.”
Both Atkins and SEC Commissioner Hester Peirce have celebrated the Ripple settlement online, writing that it allows the SEC to move from litigation toward regulation.
Benjamin Edwards, a law professor at the WIlliam S. Boyd School of Law at the University of Nevada, Las Vegas, said while he sees Ripple as “generally a good faith actor,” the SEC is “captured by the crypto industry.” The $125 million fine, said Edwards, had to be levied despite the new administration, because of the strength of the SEC’s first ruling in 2023.
Had a Democrat won the presidency, Ripple “might’ve been looking down the barrel of a billion-dollar gun,” Edwards added.
Given how far the case had progressed, he explained, agreeing to dismiss the appeal would leave the $125 million fine that the District Court had first imposed.
“Ripple was on the hook — and I mean on the hook like a fish,” said Edwards, who specializes in business and securities law. “The hook was in Ripple’s mouth, and they’re being dragged along the ground.”
No longer. The case dismissal leaves the $125 million fine that was first imposed, and also retains the judge’s 2023 ruling that XRP is not a security, when sold to individuals. “I sorta expect Ripple is gonna make a lot more than $125 million in the next couple of years,” Edwards said.
Correction: An earlier version of this article referred to XRP as a centralized token. XRP is a decentralized token.
So a billionaire republican standing right by an “independent “ mayor who claims to be democrat who has only appeared in the Bayview three times in the first 8 months of office?
Engardio clowns.
How many people were ripped off by crypto scams? Raise your hands.
Lurie pretended to be a man of the people. That wig fell off real quick.
The corrupting influence of such crypto-grifters bodes poorly for City Hall in the Trump era. And Larsen calls himself a “good actor.” Disgusting.
The foxes have been in the henhouse for quite some time, but now the wolves have moved on in. There are now so many predators in the coop that there’s no more room for the chickens. Which isn’t a problem as the predators are ravenously gobbling them all up as fast as they can. After which, continuing the half-boiled metaphor, there will be no more eggs. tl;dr: AI and crypto shell-game mania will make SF ground zero for the next financial crackup. Read your Ed Zitron. The yokes on us.