Ripple vs. SEC: Court grants motions to dismiss and strike, sets schedule

  • Judge Torres granted Garlinghouse and Larsen’s motion for leave to file a motion to dismiss.
  • However, Judge Torres also approved the SEC’s motion to strike Ripple’s “fair notice” defense.

Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen yesterday received the right to file their motions to dismiss. As CNF reported, Garlinghouse and Larsen had each filed a letter on March 03 indicating their intent to file a motion to dismiss the SEC’s amended complaint against them.

Attorney Jeremy Hogan stated regarding the letter that the lack of “scienter” argument – the fact that the act was knowingly committed – could be a winning argument for Garlinghouse and Larsen. “They [the SEC]are not going to be able to prove it because not even the federal government know it.”

The SEC, however, disagrees and had subsequently, a week later, sent a letter to Judge Torres of the Southern District of New York explaining why the dismissal of the individual claims against Garlinghouse and Larsen is improper. Judge Torres’ document, published yesterday on CourtListener, approves the filing of the motions to dismiss.

The Court has reviewed the parties letters dated March 3, 9, 10, 12, and 16, 2021, […]. Accordingly, Defendants Garlinghouse’s and Larsen’s request for leave to file a motion to dismiss is GRANTED.

In addition, Judge Torres has set numerous deadlines for further proceedings. Garlinghouse and Larsen must file their motions to dismiss by April 12; the SEC must file their motions to dismiss by May 14, 2021; and Garlinghouse and Larsen have to file their answers, if any, by June 4, 2021.

SEC allowed filing motion to strike Ripple’s defense

However, Torres also granted the SEC’s request for permission to file a “motion to strike.” The agency filed a letter on March 09 declaring Ripple Labs’ two key defense strategies, “Due Process” and “Fair Notice,” as “improper.” According to the regulator, it was not required to issue warnings about violations amid a non-public investigation.

As attorney Jeremy Hogan explained in a tweet, a victory for the SEC on this point would be a major blow. On the other hand, the SEC seems to want to eliminate these defenses of Ripple “because it is concerned about them. It would be a blow to Ripple if it’s removed. […] The SEC wants it done quick because there are facts they don’t want to come out in discovery,” Hogan said.

In the letter released yesterday, Judge Torres stated:

Plaintiffs request for leave to file a motion to strike is GRANTED.

The SEC must file the motion to strike by April 22. By May 13, 2021, Ripple Labs has to file its opposition, while the SEC will have until May 27 to file its reply, if necessary.

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