Ripple CEO Brad Garlinghouse disclosed that the company was on the verge of shutting down following the U.S. Securities and Exchange Commission's (SEC) lawsuit filed in December 2020. During a recent address at the University of Kansas School of Business, Garlinghouse recounted discussions with co-founder Chris Larsen about potentially dissolving the company and distributing XRP holdings to shareholders, a move they considered due to the SEC's extensive powers and resources.

This drastic option was ultimately rejected, as it would have resulted in significant job losses. Garlinghouse noted that the decision to continue fighting against the SEC was not straightforward, stating, “I’m glad in retrospect, but that was not obvious at the time.” His comments, shared via Wu Blockchain on July 12, have resurfaced the narrative surrounding Ripple's internal challenges during the legal proceedings.

Financial Implications of the SEC Lawsuit

The SEC's lawsuit accused Ripple of conducting unregistered securities sales involving XRP, alleging that the company raised over $1.3 billion through these transactions. Garlinghouse mentioned that prior to the lawsuit, he met with SEC officials multiple times without legal counsel and was never informed that XRP might be classified as a security. This lack of communication influenced his determination to contest the SEC's claims.

Over the course of four years, Ripple expended approximately $150 million in legal fees to counter the SEC's allegations. The lawsuit severely impacted Ripple’s partnerships in the U.S., access to institutional clients, and overall business operations. In July 2023, Judge Analisa Torres issued a ruling that partially favored Ripple, determining that XRP sales on public exchanges did not violate securities laws, while still holding Ripple accountable for direct sales to institutional buyers.

Ongoing Legal Challenges and Settlement Attempts

Following the court's decision, Ripple faced a civil penalty of $125 million and restrictions on future institutional sales of XRP. In 2025, Ripple and the SEC attempted to negotiate a settlement that would have reduced the penalty to $50 million and lifted the injunction against the company. However, Judge Torres rejected this settlement, stating that a final judgment had already been established and could not be modified in that manner.

This material is informational and should not be considered financial advice.