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SEC Sues Ripple Over “Illegal Securities Offering” of XRP Tokens

  • The Securities and Exchange Commission has sued Ripple over what it terms the “illegal securities offering” of its digital asset, XRP.
  • SEC claims the Ripple violated investor-protection laws when it sold the bitcoin-like digital asset.
  • Ripple Labs Inc., its former and current CEOs prepare to appear in court

On Tuesday, December 22, the United States Securities and Exchange Commission filed a civil suit against Ripple Labs Inc. claiming that the “third-largest cryptocurrency” violated investor-protection laws when it sold its digital asset, XRP.

Ripple Sued Over Its Seven Year Asset Offering

he SEC has filed a civil lawsuit against Ripple, its founder and former CEO, Christian Larsen, and its current CEO Bradley Garlinghouse. According to the lawsuit filed by the SEC, during a seven-year period, Ripple has raised more than $1.3 billion through an unregistered securities offering.

The complaint refers to the XRP as an “illegal securities offering” which has created an information asymmetry that let its two executives sell the digital asset to investors who only knew what Larsen and Garlinghouse chose to tell them.

According to the regulatory agency, during its never-ending coin sale, Ripple never provided its investors with the information they needed to assess any potential risk involved in purchasing XRP.

On the flipside, Ripple is not the first cryptocurrency to face a class-action suit from the SEC.

  • In 2019, SEC filed a suit against, Block.one, the parent company of EOS for violating the registration provisions of the federal securities law. In September 2019, the company agreed to settle the charges by paying a $24 million civil penalty.
  • In July 2019, the Securities and Exchange Commission filed a lawsuit against Kik Interactive Inc. for conducting an illegal $100 million securities offering. In October this year, the company paid a $5 million fine to settle those charges.

There is a noticeable trend of the SEC winning against crypto companies sued for offering “illegal securities.” This lawsuit is fueled by a major controversy surrounding the XRP since its sale began in 2013: is the XRP a security or a currency?

At the end of the lawsuit, we could be seeing Ripple take a definite stand on the XRP being a security or not. In reacting to the lawsuit, Ripple’s CEO Brad Garlinghouse, took an unusual as he took to Twitter late Monday to get a public opinion of the SEC’s complaints.

XRP Reacts to the SEC Complaints

As of 8 p.m. EST, the value of the XRP token had plunged roughly 19 percent over the last 24 hours, according to crypto data firm CoinMarketCap. As a result, ripple has lost more than $4 billion from its market cap. The digital asset now exchanges hands at $0.414439.

Cryptocurrency holders and traders have expressed their concerns about the future of the digital asset following the SEC lawsuit. Already, two small exchanges, CrossTower and Beaxy, have delisted XRP with the latter still allowing withdrawals until further notice. Many experts believe that if the SEC prevails over Ripple, XRP may be rendered untradable. That much remains to be seen.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

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