Judge gives Ripple partial win in SEC case over XRP cryptocurrency

By Jody Godoy

(Reuters) -Ripple Labs Inc violated federal securities law in its sales of cryptocurrency XRP directly to sophisticated investors, but its sales on public exchanges did not involve securities, a U.S. judge said in ruling that sent the cryptocurrency soaring.

XRP was up 25% after the ruling, according to Refinitiv Eikon data.

The SEC had accused the company and its current and former chief executives of conducting a $1.3 billion unregistered securities offering by selling XRP, which ‘s founders created in 2012.

U.S. District Judge Analisa Torres, who is based in New York, on Thursday said the company’s $728.9 million of XRP sales to hedge funds and other sophisticated buyers amounted to unregistered sales of securities.

But Torres ruled Ripple’s XRP sales on public cryptocurrency exchanges were not offers of securities under the law, because purchasers did not have a reasonable expectation of profit tied to Ripple’s efforts.

Those sales were “blind bid/ask transactions,” she said, where the buyers “could not have known if their payments of money went to Ripple, or any other seller of XRP.”

XRP sales on cryptocurrency platforms by Ripple CEO Brad Garlinghouse and co-founder and former CEO Chris Larsen, and other distributions including compensation to employees also did not involve securities, Torres ruled.

However, Torres said a jury must decide whether or not Garlinghouse and Larsen aided the company’s violation of law.