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Paul, Weiss is widely recognized as having one of the nation’s preeminent securities litigation and regulatory practices. For two decades, our lawyers have guided global corporations and financial institutions through a series of “bet-the-company” securities-related crises, consistently reducing or eliminating their most damaging claims and negotiating favorable resolutions.

Ripple Obtains Summary Judgment Victories in SEC Lawsuit Alleging Unregistered Sales of Securities

As reported in The Wall Street Journal, The New York Times and numerous other news outlets, Paul, Weiss and joint defense counsel secured a major victory for Ripple, its co-founder Chris Larsen and CEO Brad Garlinghouse in a decision holding that the sale of digital asset XRP on public exchanges does not constitute the sale of unregistered securities.

The SEC had alleged in its December 2020 suit in the Southern District of New York that the Ripple defendants had conducted $1.4 billion in unregistered securities transactions through the sale of Ripple’s XRP token.

In a ruling heralded as a win for the broader cryptocurrency industry, as well as the defendants, U.S. District Judge Analisa Torres found that nearly $1.4 billion in sales of XRP by Ripple, and nearly $600 million in sales by Larsen and Garlinghouse, were not investment contracts under the Howey test, which determines which transactions are considered securities, and therefore did not violate Section 5 of the Securities Act of 1933. The court also found that “other distributions” of XRP by Ripple, including distributions to employees as compensation and to third parties as part of an initiative to develop new applications for XRP and the XRP Ledger, were not investment contracts, because investors did not “provide the capital” as required under the first prong of the Howey test.

Judge Torres separately held that Ripple’s sales of XRP to institutional investors, such as hedge funds – sales not made on public exchanges – were investment contracts under the Howey test, and therefore violated Section 5 of the Securities Act. Finally, the court found there to be a genuine dispute of material fact as to whether Larsen and Garlinghouse aided and abetted Ripple’s sales of XRP to institutional investors. Paul, Weiss, along with joint defense counsel, will litigate these remaining issues at trial and on appeal.

Paul, Weiss represents Larsen in this litigation.

The Paul, Weiss team includes litigation of counsel Marty Flumenbaum and partners Michael Gertzman and Meredith Dearborn.

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