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Securities and Exchange Commission v. Ripple Labs Inc.

SEC Sufficiently Alleges Individuals Aided, Abetted Company's Violations

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ORDER Plaintiff, the Securities and Exchange Commission (the “SEC”), brings this action against Defendants Ripple Labs, Inc. (“Ripple”), and two of its senior leaders, Bradley Garlinghouse and Christian A. Larsen, alleging that Defendants engaged in the unlawful offer and sale of securities in violation of Section 5 of the Securities Act of 1933 (“Section 5″ of the “Securities Act”), 15 U.S.C. §§77e(a) and (c). See Amend. Compl. 9, ECF No. 46. The SEC also alleges that Garlinghouse and Larsen (together, the “Individual Defendants”) aided and abetted Ripple’s Section 5 violations. Id. The Individual Defendants move separately under Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiff’s complaint for failure to state a claim. Larsen Mot., ECF No. 105; Garlinghouse Mot., ECF No. 110. For the reasons stated below, the Individual Defendants’ motions are DENTED. BACKGROUND The following facts are taken from the amended complaint and “are presumed to be true” for the purpose of considering the Individual Defendants’ motions to dismiss for failure to state a claim. Fin. Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395, 398 (2d Cir. 2015). The SEC alleges that, from 2013 to the filing of this action in 2020, Ripple violated Section 5 by selling XRP — which the SEC claims is an “investment contract” for which registration is required — without filing a registration statement. See Amend. Compl.

4, 9, 60, 230-31, 241-42, 289-94, 392-93. The SEC contends that Ripple and its executives promoted XRP as an investment into a common enterprise that would increase in value and price based on Ripple’s efforts. See, e.g., id.

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