Ripple’s fears of an impending lawsuit from the U.S. Securities and Exchange Commission (SEC) have finally come true. The securities regulator announced on Dec. 22 that it is charging the blockchain company and two of its executives with raising more than $1.3 billion through an ongoing and unregistered token sale.
Ripple is the company with close ties to XRP, the third-largest cryptocurrency by market capitalization.
The suit, which the cryptocurrency community has been closely following, names Ripple, CEO Bradley Garlinghouse, and co-founder and Executive Chairman Christian Larsen as defendants.
Compound Finance General Counsel Jake Chervinsky commented that it is a “rare move that the suit charges” Garlinghouse and Larsen in their personal capacities.
The SEC has officially filed suit against Ripple, alleging that XRP was & *still is* an unregistered security sold unlawfully from 2013 to present day.
In a rare move, the suit also charges Brad Garlinghouse & Chris Larsen in their individual capacity.https://t.co/R4zlT6Zpl9
— Jake Chervinsky (@jchervinsky) December 22, 2020
SEC files suit against Ripple
The suit alleges that Ripple has unlawfully administered an ongoing token sale since 2013. The company is alleged to have raised more than $1.3 billion by selling unregistered securities through XRP tokens to investors in the U.S. and worldwide.
Ripple promoted the XRP to finance its business and also distributed billions of its tokens in exchange for non-cash payouts such as labor and market-making services.
The complaint further alleges that Garlinghouse and Larsen sold XRP tokens worth nearly $600 million in their individual capacities.
The defendants are accused of failing to register their offers and token sales or getting exempted from registration. In all, they violated federal securities laws, says SEC’s press statement.
“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,” said Stephanie Avakian, Director of the regulator’s Enforcement Division.
The complaint was filed in a Manhattan federal district court.
Ripple has long been involved in lawsuits. The biggest question is “what does this mean for XRP.”
There has been an ongoing on whether the XRP token is a security or not, and if it has to fall under the regulatory eye of the SEC.