MV Capital - Ripple's Near Shutdown: SEC Lawsuit Pushed Company to the Edge

Ripple leadership considered closing operations and distributing XRP holdings after the 2020 SEC lawsuit, but chose to fight to save jobs and continue building payment technology

The Decision Point in 2020

Ripple faced intense pressure following the U.S. Securities and Exchange Commission lawsuit filed in December 2020. CEO Brad Garlinghouse revealed that executives, including co-founder Chris Larsen, discussed shutting down the company as one option.

“We almost decided to shut down the company when the SEC sued us. We were like, you know, the government has infinite power and resources. Both of us were like…what’s the right answer here? And you know, we could have shut it down and distributed…the XRP to shareholders on a pro rata basis. End of story.”Brad Garlinghouse, Ripple CEO

The team weighed distributing XRP reserves to shareholders and ending operations to avoid a prolonged legal fight. This path offered a quicker resolution but would have affected hundreds of employees. Ripple instead proceeded with defense in court.

Legal Costs and Duration

The case extended over four years and resulted in roughly $150 million in legal expenses for Ripple. The company’s U.S. operations slowed for about five years during this period. Despite the strain, Ripple maintained its workforce.

Key Facts from the LawsuitSEC accused Ripple of unregistered securities sales involving XRP.
Garlinghouse and Larsen faced personal charges related to their XRP sales.
Court rulings distinguished between programmatic sales on exchanges and institutional sales.
Final penalty set at $125 million with restrictions on certain future sales.

Prior Interactions with Regulators

Garlinghouse met with SEC staff multiple times between 2017 and 2019. He attended without legal counsel, explaining Ripple’s technology and XRP use in payments. According to Garlinghouse, no one from the SEC indicated at those meetings that XRP might qualify as a security.

“Not once did someone say to me, Brad, we think XRP might be a security.”

The SEC later sued the company and its executives. Garlinghouse described the agency’s offer to settle his personal case separately as distasteful. He refused the arrangement and stood with the company.

XRP Technology and Purpose

Ripple built its payment solutions around XRP for speed and low cost. Transactions typically settle in about four seconds at a fraction of a cent. Garlinghouse contrasted this with Bitcoin transactions, which can take around 10 minutes and cost about $10 on average.

Aspect	XRP	Bitcoin
Transaction Time	4 seconds	10 minutes
Typical Fee	Less than 1 cent	Around $10
Primary Use	Institutional payments	Peer-to-peer value transfer

Ripple sells software to banks and financial institutions. It does not sell XRP directly to retail users in the same manner. The company holds XRP but does not control the open-source XRP Ledger network.

Court Outcome and Aftermath

Judge Analisa Torres issued a split decision in 2023. Programmatic sales of XRP on public exchanges were not deemed securities transactions. Institutional sales faced different treatment. Appeals concluded in 2025 following leadership changes at the SEC.

Ripple continued operations throughout the proceedings. The company secured regulatory approvals in regions such as Europe, including a Markets in Crypto-Assets license in Luxembourg. It expanded partnerships and developed additional products like its RLUSD stablecoin.

“They got advice from lawyers that the company was done, unsavable, and they should cut a deal to save themselves. I think the SEC named Brad and Chris personally because that’s the expected response to such a suit.”David Schwartz, Ripple CTO

Company Background and Growth

Founded in 2012, Ripple raised venture capital through equity sales in 2012, 2015, and 2016. These shares represented ownership stakes, unlike XRP, which functions as a bridge asset for payments without granting voting rights or claims on company profits.

Early in its history, some legal advisers suggested the company might not survive regulatory and market challenges. Leadership proceeded with building global payment infrastructure and banking relationships. The SEC case tested that resolve further but did not halt progress.

Ripple now operates with focus on institutional solutions, tokenization, and cross-border payments. Its experience during the lawsuit period informed ongoing efforts to seek clearer regulatory frameworks for digital assets in the United States.