As reported yesterday, the SEC has filed a lawsuit against Ripple for its continued sales of XRP on the market.
In an official press release, the US Securities and Exchange Commission revealed that it has accused the company and two executives of issuing unregistered securities worth $1.3 billion.
The Securities and Exchange Commission has therefore filed an action against Ripple Labs Inc., the company’s co-founder, executive chairman of the board and former CEO Christian Larsen, and current CEO Brad Garlinghouse.
The indictment relates to XRP issued by the company to raise funds dating back to 2013, which is considered an unregistered offering of securities to investors. It also accuses Larsen and Garlinghouse of carrying out unregistered personal sales of XRP totalling approximately $600 million.
Technically, the complaint, filed in federal district court in Manhattan, accuses the defendants of violating the registration provisions of the Securities Act of 1933.
SEC lawsuit against Ripple impacts XRP
The price of XRP has been heavily impacted by this news, as it is losing more than 20% since yesterday.
In fact, yesterday itself, after the publication of the rumours about the probable lawsuit, the price had already fallen heavily.
After exceeding 0.6$ on December 17th, in the following days it first fell to 0.56$, then to 0.5$, and finally collapsed below 0.4$, returning to the levels of about a month ago. It is still about twice what it was worth at the beginning of the year.
The CEO of Ripple Brad Garlinghouse commented by saying that Ripple has been working for 8 years to build a company that wants to transform the global payments industry and that their mission does not stop.
He also speculates that what is underway is an all-out attack by the SEC against the crypto industry in the US, and that the SEC itself is wrong with these accusations, because he believes that XRP is not an investment contract, and therefore not a security.
By contrast, SEC Enforcement Division Director Stephanie Avakian said:
“Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution and a secondary trading market, must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies. 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”.
Deputy Director Marc P. Berger added:
“The registration requirements are designed to ensure that potential investors – including, importantly, retail investors – receive important information about an issuer’s business operations and financial condition. Here, we allege that Ripple and its executives failed over a period of years to satisfy these core investor protection provisions, and as a result investors lacked information to which they were entitled”.