Stu Alderoty, chief legal officer at Ripple, brings over three decades of legal experience to crypto’s frontlines. Before joining Ripple six years ago, he spent 30 years in private practice – first at LeBoeuf, Lamb, Greene & MacRae, and later as general counsel for major financial institutions, such as HSBC. J.W. Verret, George Mason University School of Law professor, sat down with him to discuss Ripple’s landmark battle with the SEC and its implications for the broader crypto industry.
What made you transition from traditional law to crypto?
“I was attracted to being on the front line and helping to develop laws, rules and regulations from scratch for a relatively new industry. I would have hoped that would have been done outside of the courtroom and done legislatively, collaboratively with regulators. We took a five or six-year detour into the courtroom. We’re now out of the courtroom, and we can get back to working collaboratively with regulators and policymakers to get principle-based laws, rules and regulations in this country when it comes to crypto.”
What was your initial reaction when the SEC filed its lawsuit in December 2020?
“We had probably at least a year and a half, if not two years, of discussion with the SEC where we were responding in good faith to their investigative inquiries. I naively thought we would come to a rational resolution, as I often did in traditional financial services. What I learned was that the SEC, at least under the prior administration, was not looking to solve a legal problem but a political problem – crypto. When they sued us, we put the legal machine into full gear but also the public relations machine because we needed to seize the narrative. We said we’d defend this case not only on Ripple’s behalf but on behalf of the entire industry. Those were really dark days – nearly every crypto exchange in the U.S. delisted XRP, most U.S. clients stopped doing business with us, and the SEC targeted our international relationships. But we stood firm with the resources to withstand this onslaught.”
As a lawyer, what was it like having this crowd-sourced ally in the public, including John Deaton’s amicus briefs?
“That was one of the unique aspects of this case. The SEC’s mission is supposedly to protect consumers, but in reality, their lawsuit sucked $15 billion of market cap out of XRP markets, hurting the rank-and-file holders. John Deaton filed his own lawsuit within 48 hours on behalf of XRP holders. Judge Torres gave him what I call ‘amici plus status’ – allowing him to speak more expansively about what it meant to be an XRP holder affected by the SEC’s actions. We ended up with probably 15 amici briefs in this case, which is extraordinary for a district court case. I think all of that weighed very favorably on Judge Torres in reaching her decision.”
Tell me about growing the fight beyond the courtroom and into the public and political arena.
“It starts with Brad Garlinghouse and Chris Larsen, the leaders of our firm, and their courage and conviction. The SEC gave us no choice – their theory was that everything came under their jurisdiction, meaning you had to ‘come in and register’ with them. But everyone knows there was no means to register a crypto company with the SEC. What they wanted was to destroy the company. Every smaller company they had targeted either went bankrupt or surrendered and left the United States. Ripple wasn’t going to declare defeat or leave. We were founded in the U.S. by entrepreneurs and believe in American innovation and technology. We would have accepted any reasonable settlement involving significant compromises, but they wanted surrender. So we grew our business in Asia, the Middle East, the UK, EU, and Latin America during the lawsuit, but refused to fold in the U.S.”
You’re becoming president of the new National Cryptocurrency Association. What will its role be?
“The seed of the NCA was born about six or eight months ago, long before anyone knew the election outcome. What we don’t have in this country is a non-profit that is apolitical, not beholden to any project or protocol, not a lobbying organization, but simply there to be a voice for everyday Americans who own and use crypto. The NCA will be that megaphone and also a one-stop shop for the crypto-curious to learn more. The goal is to demystify crypto, de-villainize it, and provide a platform for everyday users. It’s even more important now with an administration committed to making the U.S. the crypto capital of the world.”
How do you see Ripple’s future engagement with regulators?
“The industry had a common enemy in the SEC and came together to fight it. Having defeated that enemy, the worst thing we can do is retreat into tribalism. We need to continue working in a coordinated way, with a relatively uniform voice about rational laws, rules and regulations. Ripple has always been a regulatory-first company because our customers are enterprise-level and regulated themselves. We’re excited to engage with policy makers who have an open mind to crypto. The scar tissue we earned through litigation gives Ripple a certain gravitas, but we’ll continue to fight for clear regulations not only for ourselves but for the entire industry.”
