The early days of Ripple Labs’ historic legal battle with the U.S. Securities and Exchange Commission (SEC) were far more precarious than previously known.
In fact, the company’s executive leadership received explicit legal advice to capitulate and shut down operations, according to Ripple vet David Schwartz.
The brink of total shutdown
Garlinghouse recently told the University of Kansas School of Business that the initial SEC lawsuit almost marked the immediate end of Ripple.
When asked about the most difficult decision he has ever made as an executive, Garlinghouse admitted that the company’s survival was an open question.
“We almost decided to shut down the company when the SEC sued us,” Garlinghouse revealed. “We were like, you know, the government has infinite power and resources.”
According to Garlinghouse, he and Ripple co-founder Chris Larsen were seriously considering dissolving the firm overnight. “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.”
“I think that was a bad outcome, but in some ways it was the easier outcome, and that was a difficult decision,” Garlinghouse stated, adding that the company’s very survival was not obvious back then.
“Unsavable”
Some social media commentators have questioned whether a multi-billion-dollar firm was truly on the verge of collapsing so quickly. However, Schwartz clarified that this was the case due to the bleak legal advice that the company’s top brass was getting back then. “They got advice from lawyers that the company was done, unsavable, and they should cut a deal to save themselves,” Schwartz revealed.
Schwartz also noted that there was a specific intention to break the resolve of leadership. “I think the SEC named Brad and Chris personally because that’s the expected response to such a suit,” Schwartz stated, suggesting the personal charges were a calculated maneuver to force a rapid settlement.
Suspecting crypto revival
The revelations about Ripple’s near-closure have reignited long-standing conspiracies about the SEC’s aggressive enforcement actions.
Schwartz added some fuel to the “ETHGate” fire by pointing the finger directly at industry competitors.
“I don’t have good evidence for this, but I think it’s more likely that competing crypto projects had more to do with it,” Schwartz dropped as a bombshell claim. However, this is just speculation (as the Ripple vet has clarified). “I’m not really sure why I think that, so feel free to disagree,” he said.
Schwartz doubled down on his intuition when asked specifically about the Ethereum-related conspiracy. “Again, I don’t have good evidence for this,” Schwartz reiterated, “but I do feel it is more real than fake.”
