The US SEC has accused Ripple of selling $1.3 billion worth of XRP as unregistered securities during its 2013 ICO. The Ripple lawyers say that the allegations are completely baseless and XRP is not an “investment contract”.
On Tuesday, December 22, the United States Securities and Exchange Commission (SEC) sued San Francisco-based blockchain startup Ripple Labs on charges of selling its XRP tokens as unregistered securities during its 2013 ICO. The regulator accuses Ripple of illegally raising $1.3 billion through its Initial Coin Offering (ICO). The SEC charges are centered around Ripple distribution billions-of-dollars in XRP as noncash considerations. In the complaint, the SEC specifically mentions Ripple CEO Brad Galinghouse and co-founder Chris Larsen.
The regulator notes that both of them affected personal unregistered sales of XRP worth $600 million. Since the defendants failed to register their offers and sales, the SEC has accused Ripple of violating the Federal Securities Laws. Stephanie Avakian, Director of the SEC’s Enforcement Division writes:
“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which 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.”
Ripple CEO Brad Garlinghouse is firm on his stand that XRP is a ‘currency’ and not a ‘security’. He also calls the lawsuit “fundamentally wrong as a matter of law and fact. XRP is a currency, and does not have to be registered as an investment contract,” he adds.
Interestingly, Garlinghouse had already predicted this move from the SEC a day before. Moreover, he also referred to the SEC charges as “an attack on the entire crypto industry and American innovation”.
XRP Price Tanks 25% Slipping Below $0.35 after the News on Ripple and SEC
While the crypto market has entered recovery, XRP has lost more than 25% slipping below $0.35 levels earlier today. At press time, XRP is trading $0.37 with a market cap of $16 billion. With the latest XRP price crash, nearly $13 billion of valuations have been eroded with XRP losing its third spot to Tether (USDT).
Interestingly, a debate sparked with the crypto community on Tuesday when one of the Ripple documents mention Bitcoin (BTC) and Ethereum (ETH) as “Chinese-controlled”. Ethereum co-founder Vitalik Buterin lashed out at Ripple calling XRP a shitcoin.
Looks like the Ripple/XRP team is sinking to new levels of strangeness. They're claiming that their shitcoin should not be called a security for *public policy reasons*, namely because Bitcoin and Ethereum are "Chinese-controlled". 😂😂https://t.co/ts02JqrTrB pic.twitter.com/mKwEzGIetk
— vitalik.eth (@VitalikButerin) December 22, 2020
However, with the recent lawsuit, Ripple has also managed to garner some support in its favor. The Ripple lawyers wrote:
“The SEC is completely wrong on the facts and law and we are confident we will ultimately prevail before a neutral fact-finder. XRP, the third largest virtual currency with billions of dollars in trading every day, is a currency like the SEC has deemed Bitcoin and Ether, and is not an investment contract. This case bears no resemblance to the initial coin offering cases the SEC has previously brought and stretches the Howey standard beyond recognition.”
It looks like this is going to be a big battle ahead between the regulator and the blockchain startup. Ripple’s Japanese partner SBI Holdings said that the company won’t face any such issues in its legislation.
Japan’s FSA has already made it clear that XRP is not a security. I’m optimistic that Ripple will prevail in the final ruling in the US. SBI Holdings remains a steadfast partner to Ripple, and looks forward to expanding together in Asia. https://t.co/MFRxLLAZdG
— 北尾吉孝 (@yoshitaka_kitao) December 22, 2020
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