The rumors are true. The SEC (Securities and Exchange Commission) has filed a lawsuit against Ripple.
Over the past 7 years, $1.3 billion has been raised to fund Ripple Labs operations and project start-ups without registering XRP as a security or filing for an exemption.
SEC charges Ripple and two executives with conducting $1.3 billion unregistered securities offering https://t.co/3VP23RpSyV
— SEC_News (@SEC_News) December 22, 2020
Defendants in the case include Ripple Labs as well as its CEO Brad Garlinghouse and Chairman/Co-founder Chris Larsen.
The lawsuit reads, “Over a years-long unregistered offering of securities (the ‘Offering’), Ripple was able to raise at least $1.38 billion by selling XRP without providing the type of financial and managerial information typically provided in registration statements and subsequent periodic and current filings. Ripple used this money to fund its operations without disclosing how it was doing so, or the full extent of its payments to others to assist in its efforts to develop a ‘use’ for XRP and maintain XRP secondary trading markets.”
Ripple’s executives still refute these claims saying that XRP is a cross-border exchange currency. They also reiterated that Ripple Labs is separate from XRP even though the name Ripple was used in conjunction with XRP and it also used the same logo.
The company goes into more detail with their defense and the claim that XRP is not a security like bitcoin and ethereum in Well’s Submission response to SEC.
Consequences of this announcement were immediate as XRP dropped 15% in the last 24 hours to .40 cents. However, this is only the beginning. As the lawsuit proceeds, crypto exchanges that list XRP will also be required to register with SEC. This may cause them to delist the crypto.
Holders of XRP are also placed in a difficult position as the price drops and Ripple’s actions toward the lawsuit seem to be questionable.
Read the full SEC v. Ripple lawsuit here.