Ripple’s early legal battle with the U.S. Securities and Exchange Commission (SEC) pushed the company to the brink of a total shutdown, according to new revelations from Chief Technology Officer David Schwartz and CEO Brad Garlinghouse. Speaking at the University of Kansas School of Business, Garlinghouse recalled the dire situation following the SEC’s lawsuit. “We almost decided to shut down the company when the SEC sued us,” he said, noting that the government’s infinite resources made survival seem impossible. He and co-founder Chris Larsen seriously considered dissolving Ripple and distributing XRP to shareholders on a pro rata basis. “I think that was a bad outcome, but in some ways it was the easier outcome,” Garlinghouse admitted.
Schwartz later provided a starker detail: the company’s lawyers explicitly told leadership that Ripple was done and unsavable, and they should cut a deal to protect themselves personally. Schwartz suggested the SEC’s decision to name Garlinghouse and Larsen as individual defendants was a calculated move to break the executives’ resolve and force a rapid settlement. “I think the SEC named Brad and Chris personally because that’s the expected response to such a suit,” he explained.
The disclosures reignited debate over the SEC’s aggressive enforcement and conspiracy theories about industry rivals playing a role. Schwartz added fuel to the so-called “ETHGate” speculation, stating without solid evidence that competing crypto projects likely had more influence in prompting the lawsuit than is publicly known. “I’m not really sure why I think that, so feel free to disagree,” he said, but reiterated his belief that the Ethereum-related angle is more real than fake.
