Ripple Sued by SEC, Calling XRP a “$1.3B unregistered securities offering”
Ripple, Garlinghouse, and Larsen have allegedly participated in an “unregistered, ongoing digital asset securities offering” to investors since 2013, according to the SEC (Securities and Exchange Commission)
The United States Securities and Exchange Commission has recently taken legal actions against Ripple and its CEO Brad Garlinghouse and co-founder Christian Larsen.
In the charges filed on December 22, 2020, in federal district court in Manhattan, the SEC alleges that the XRP token is classified as a security and accuses that Ripple and its two executives of raising over $1.3 billion through an “unregistered, ongoing digital asset securities offering” to investors since 2013. The Securities and Exchange Commission also alleged that Ripple distributed XRP for “labor and market-making services,” and that the two executives, Garlinghouse and Larsen, failed to register their sales of their personal XRP, which amounts to an estimated $600 Million.
Stephanie Avakian, Director of the SEC’s Enforcement Division, had this to say regarding the matter: “[The things they have done has] deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”
Under the Securities and Exchange Commission regulations, individuals and cryptocurrency firms have to register their offerings with the SEC or an exemption if they are classified as securities. However, which tokens under this classification remain unclear and an extremely contentious subject. The cryptocurrency industry has been waiting for clarity from the commission or newer and clearer legislation on these classifications for a long time.
Meanwhile, the SEC alleges that Garlinghouse and Larsen had failed to register XRP back when it was still serving as an investment in Ripple, and it has enriched the pair of executives. The pair and the firm could face disgorgement of their gains and civil penalties.
News of the lawsuit from SEC broke out a day before it dropped and caused a steep drop in the price of XRP, having fallen 20% in the last week. On Twitter, Garlinghouse addressed the charges. He said that the SEC “voted to attack crypto” and “The SEC is doing the opposite of ‘fostering innovation’ here in the US.”
Garlinghouse announced the impending action of the SEC last night. In mid-November, the CEO said that since most RippleNet’s customers are located outside the United States, is classified as a security wouldn’t necessarily affect the company’s underlying business adversely. On the other hand, in early-2020, Larsen announced that Ripple is considering relocation outside the United States because of the frustrations with the SEC’s lack of regularity clarity