Ripple came close to shutting down rather than fighting the SEC, CEO Brad Garlinghouse revealed. He described the decision he and co-founder Chris Larsen faced after the agency sued the company in 2020.

Why Ripple Nearly Shut Down After the SEC Lawsuit

The SEC sued Ripple in 2020, claiming it had sold XRP as an unregistered security, and named Garlinghouse and Larsen personally.

Speaking at the University of Kansas School of Business, Garlinghouse admitted the company’s survival was an open question. He recalled thinking the government had “infinite power and resources,” making a fight feel almost impossible at the time.

The alternative path was surprisingly simple. Ripple holds a large amount of XRP, so the founders could have distributed it to shareholders on a pro rata basis.

Furthermore, dissolving the company would have ended the case entirely.

“We almost decided to shut down the company when the SEC sued us… hundreds of people would have lost their jobs. I think that was a bad outcome, but in some ways it was the easier outcome and uh that was a difficult decision…” Garlinghouse revealed.

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Garlinghouse called that the easier outcome, though a bad one. However, the two chose to fight because shutting down would have cost hundreds of jobs. “I’m glad in retrospect, but that was not obvious at the time,” he said.

The pressure was deeply personal, too. Garlinghouse said he met SEC officials four times between 2017 and 2019 without a lawyer. Moreover, he was never told that XRP might be treated as a security, which shaped his view that Ripple lacked clear rules.

Was Ripple Really That Close to Collapse?

Some observers questioned whether a multi-billion-dollar firm could truly collapse so quickly. However, Ripple CTO Emeritus David Schwartz clarified that the threat was real, driven by the bleak legal advice leadership received at the time.

He also suggested the personal charges were strategic. Schwartz argued the SEC named Garlinghouse and Larsen personally to break their resolve.

Moreover, he called it the expected maneuver to force a rapid settlement from the company’s leadership.

The Ripple veteran even floated a controversial theory. Without firm evidence, he suggested competing crypto projects may have influenced the enforcement action.

However, he stressed this remained pure speculation rather than a claim backed by any proof.

“Again, I don’t have good evidence for this, but I do feel it is more real than fake,” Schwartz responded after being asked about ‘ETHGate’.

The fight ultimately paid off for Ripple. Judge Analisa Torres ruled that XRP itself is not a security. Both sides settled in May last year, after new SEC leadership under the Trump administration adopted a more accommodating approach to crypto.

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Source: BeInCrypto