Topeka Native Brad Garlinghouse Cleared of Wrongdoing in Crypto Currency Lawsuit

Brad Garlinghouse

By Michael Hooper

In the world of cryptocurrency it’s sometimes hard for the government to tell the difference between the good guys and the bad guys. 

While the government let Sam Bankman-Fried go unchecked in the Bahamas, squandering billions of dollars in crypto at FTX, the U.S. government was actively trying to take down Ripple Labs and its CEO Brad Garlinghouse and cofounder, Chris Larsen.

In the end, the courts found Bankman-Fried guilty and he faces the potential for over 100 years in prison, and the Securities and Exchange Commission decided to drop its lawsuit against Brad Garlinghouse, Chris Larsen and Ripple Labs.

Garlinghouse is the son of Kent and Susan Garlinghouse of Topeka, he is a graduate of Topeka High School, the University of Kansas and Harvard Business School.

More than four years ago the SEC filed a lawsuit against Garlinghouse, Larsen and Ripple Labs alleging that its cryptocurrency, XRP, is a security and should be registered with the SEC as such. But last July a judge ruled that XRP is not a security. Then in October the SEC dropped its lawsuit against them with prejudice.

“I think this is a huge win, not just for Ripple but for the whole industry,” Garlinghouse told CNBC after the judge’s ruling in July.

Ripple has spent about $200 million defending itself against the SEC. Wow, that’s a staggering amount of money. 

I have to admire Garlinghouse for never giving up, never throwing in the towel, it’s hard to fight the government. It cost a lot of money, but in the end, Garlinghouse and his colleagues at Ripple Labs won. In a sense they helped usher in a new era in regulation of cryptocurrency. In the future, the SEC will think twice about filing lawsuits against the creators and founders of a cryptocurrency.

A key difference between a security and a crypto currency is ownership. With a security, you presumably own a share of a company. With crypto, you don't own a piece of a company, XRP does not give you a share of Ripple Labs.

The price of XRP was trending around $.45-$.50 before the judge's ruling in July. After the ruling XRP jumped to $.70 and then fell back down around $.50 and now it’s around $.62 per unit.

Ripple Labs uses XRP as a way to perform cross border transfers of money around the world. For example, if someone wanted to send $5,000 from the United States to a friend in Dubai, they could buy $5,000 worth of XRP, ship the crypto to the friend, then the friend could sell the XRP on the open market and take proceeds in the currency of his choice.