The US Securities and Exchange Commission has taken legal action against Ripple and its CEO Brad Garlinghouse and his co-founder Christian Larsen.
In indictment filed today in Manhattan Federal District Court, The commission claims the XRP token is classified as collateral, accusing Ripple and the two executives of raising more than $ 1.3 billion since 2013 through an “ongoing offering of unregistered digital securities” to investors. The SEC also alleged that Ripple was distributing XRP for “labor and market-making services” and that Garlinghouse and Larsen did not disclose their personal XRP sales, which were valued at $ 600 million.
“”[Estas acciones] Withheld from potential buyers proper disclosure of XRP and Ripple’s business, as well as other important long-term protections vital to our resilient public market system. “ said Stephanie Avakian, Director of the SEC’s Enforcement Division.
According to SEC regulations Individuals and crypto companies must register their offers with the commission or under an exemption if they qualify as securities. However, which tokens qualify as securities remains an extremely controversial issue. The crypto industry has long waited for clarity from the SEC or new laws on this issue.
Meanwhile, The SEC says Garlinghouse and Larsen didn’t register XRP when it served as an investment in Ripple for both of them to enrich themselves personally. The company and its two executives could face forfeiture of their profits as well as civil penalties.
The news from the next The SEC lawsuit surfaced yesterday and resulted in a sharp drop in prices for XRP. At the time of this story, the token is worth $ 0.42. down more than 20% in the past week. Garlinghouse responded to the indictment on Twitter, saying that the SEC “voted for the attack on the cryptocurrency”.
“The SEC is doing the opposite of ‘promoting innovation’ here in the US,” said Garlinghouse, referring to the Commission’s FinTech wing, FinHub, who announced that it will become an independent bureau earlier this month. “You’re not just attacking XRP here.”
The members of the Ripple Board of Directors and Yoshitaka Kitao, CEO of SBI Holdings, said that he was “optimistic that Ripple would win in the final verdict”. Kitao said he believed Japan’s financial watchdog “had already made it clear that XRP is not a security,” and expected a similar outcome from US regulators.
David Schwartz, Ripple’s CTO seemed less hopeful than Kitao to the reply to the posts on Twitter:
“The United States is one of the few countries where after years in broad daylight and frequent updates on everything you do, regulators turn around and tell you you should have known you were breaking the law – all the time Decades old. By the way, of course. “
Garlinghouse announced an upcoming SEC action last night. In November, he said because most of RippleNet’s customers are outside of the US, If XRP was classified as a security, it would not necessarily affect the company’s underlying business. At the beginning of this year Larsen said Ripple is considering moving out of the United States amid growing frustration with the lack of clarity of regulations.