Ripple came very close to shutting down its operations after being sued by the SEC (U.S. Securities and Exchange Commission) in 2020. The revelation was made by the company's CEO, Brad Garlinghouse, who explained that the company's continuity was in doubt during the early moments of the legal dispute involving XRP.
During a lecture at the University of Kansas School of Business, Garlinghouse said that he and co-founder Chris Larsen seriously considered the possibility of closing the company instead of facing a long battle against the U.S. regulator. According to the executive, the perception at that moment was that the government had virtually unlimited resources to sustain a legal dispute.
The SEC lawsuit accused Ripple of selling XRP as an unregistered security. In addition to the company, the action also targeted Garlinghouse and Larsen, placing both directly at the center of the regulatory dispute that became one of the most closely followed by the cryptocurrency market.
According to the CEO, there was an alternative considered relatively simple to end the problem. As Ripple held a significant amount of XRP, the assets could be distributed proportionally to shareholders before the dissolution of the company. With that, the legal case would also be closed.
"We almost decided to shut down the company when the SEC sued us… hundreds of people would have lost their jobs. I think it was a bad outcome, but in a way it was the easiest, and it was a difficult decision…," Garlinghouse revealed.
Despite considering this exit the simplest, the executive said that the impact on employees weighed on the final decision. Instead of ending operations, the founders chose to defend the company in court, preserving hundreds of jobs while contesting the accusations brought by the regulator.
Garlinghouse also highlighted that, looking back, he believes the choice was the right one, although the decision was far from obvious when the lawsuit began.
"In hindsight, I'm happy about it, but it wasn't obvious at the time," he said.
Another point recalled by the executive was his previous relationship with the SEC. Between 2017 and 2019, Garlinghouse said he participated in four meetings with agency representatives without the presence of lawyers. According to him, in none of those meetings was he informed that XRP could be treated as a security.
This experience reinforced Ripple's assessment that there was a lack of clear rules for the cryptocurrency sector in the United States, an argument that accompanied the company's legal strategy throughout the entire dispute against the SEC and influenced the regulatory debate involving the country's cryptocurrency market.
