1. Introduction

The Securities and Exchange Commission (“SEC”) filed a litigation to the United States District Court Southern District Of New York against RIPPLE LABS, INC., CHRISTIAN A. LARSEN and BRADLEY GARLINGHOUSE on December 22, 2020, claiming that XRP – the virtual currency of Ripple – was supposed to be the subject of the federal securities laws as it constitutes a security but as it failed to conform to such laws, punishment and suspension order for the non-compliance must be rendered. As a response to this complaint (the “Complaint”), Ripple submitted an answer (the “Answer”) on January 29, 2021 requesting the court’s dismissal of such Complaint by the SEC based on the primary allegation that XRP is not a security.

This document summarizes the gist and details of the request made by Ripple in its Answer on the SEC’s Complaint.

2. The Remedies the SEC filed with the court against RIPPLE and the grounds therefor:

In its Complaint dated December 22, 2020, the SEC requested the court to order Ripple’s disgorgement of all ill-gotten gains, prohibition of Ripple’s issuance of XRP and imposition of civil money penalties on Ripple because Ripple violated the federal securities laws by failing to conform to such laws despite the fact that XRP constitutes a security. The original details of such claim are as follows:

“The Commission seeks a final judgment: (a) permanently enjoining Defendants from violating Sections 5(a) and 5(c) of the Securities Act, pursuant to Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)]; (b) pursuant to Section 21(d)(5) of the Securities Exchange Act of 1934 (“Exchange Act”), (i) ordering Defendants to disgorge their ill-gotten gains and to pay prejudgment interest thereon and (ii) prohibiting Defendants from participating in any offering of digital asset securities; and (c) imposing civil money penalties on Defendants pursuant to Section 20(d) of the Securities Act.” (page 3 of the SEC’s Complaint).

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