SEC Files Proposed Settlement Framework with Ripple Labs

The Securities and Exchange Commission (SEC) on Thursday filed a settlement agreement entered into with defendants Ripple Labs, Inc., its CEO Bradley Garlinghouse, and its Executive Chairman Christian A. Larsen. The agreement lays out a framework aimed at resolving the Commission's civil enforcement action against them.

The settlement agreement includes a provision whereby the Commission and Ripple would jointly request the district court to issue an indicative ruling on two matters: whether it would dissolve the injunction previously issued against Ripple in the district court's final judgment and order from August 7, 2024, and whether it would order the release of funds held in an escrow account, which total $125,035,150 and represent the civil penalty imposed by that final judgment. The agreement specifies that if the court were to indicate its willingness to dissolve the injunction and release the escrowed penalty amounts as requested, $50 million would be paid to the Commission in full satisfaction of the civil penalty, with the remaining funds in the escrow account paid to Ripple.

The Settlement Agreement further provides that, following an indication from the district court that it would grant the requested relief, the Commission and Ripple will seek a limited remand to the district court specifically for the purpose of dissolving the injunction and releasing the escrowed funds. After this remand and the granting of relief by the district court, both parties would then move to dismiss their respective appeals from the final judgment, which are currently pending before the United States Court of Appeals for the Second Circuit.

The Commission and the defendants jointly filed the settlement agreement with the district court as part of their request for an indicative ruling from the court.

The SEC provided a comment on the settlement, stating: "The Commission's decision to exercise its discretion and seek a resolution of this pending enforcement action rests on its judgment that such resolution will facilitate the Commission's ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action. Furthermore, the Commission's decision to resolve this enforcement action does not necessarily reflect the Commission's position on any other case".