The Securities and Exchange Commission (SEC) has officially announced that it will be seeking charges against Ripple Labs Inc, its co-founder and ex-CEO Christian Larsen, and current CEO Brad Garlinghouse.
The news comes after recent rumors that the SEC was preparing to file these charges, something Garlinghouse felt was unjust. The SEC is accusing Ripple and associated parties of raising over $1.3 billion in funds through the sale of ‘ongoing digital asset securities offerings.’
In addition to going after Ripple Labs Inc. for the funding of the organization through sales of unregistered securities, the SEC is also going after two of the top Ripple Executives.
Coming directly from the official SEC press release, the release states;
“According to the complaint, in addition to structuring and promoting the XRP sales used to finance the company’s business, Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately $600 million.”
The press release continued, with Stephanie Avakian, the Director of the SEC’s Enforcement Division, commenting, “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.”
SEC on the Hunt
The SEC has had previous success going after cryptocurrency companies for the sale of unregistered securities. Such examples include the Telegram TON token, Salt Blockchain, BitClave, and BCOT.
The regulator is now setting its sights on the fourth-largest cryptocurrency by market cap, XRP.
Since rumors started spreading yesterday about the preparation of a suit against Ripple, XRP has seen a 25% decrease in price.
Garlinghouse has stated that he believes XRP is a currency, not a security. He likened the token to Bitcoin and Ethereum, but the SEC feels different. If XRP is deemed a security, it will likely impose further regulatory restrictions and fines.
What is Ripple and XRP?
XRP is a cryptocurrency created by Ripple Labs to serve as the native cryptocurrency for its payment processing platform.
Ripple advertises faster and lower-cost transactions compared to traditional payment processors. Essentially, XRP is trying to compete against Bitcoin and Ethereum as a store and transfer of value, but are working on framing its platform as one that is being adopted into traditional financial institutions.
For example, international banking conglomerate Santander has partnered with Ripple to develop one of its payment services for international payments, but this service could just have easily been developed on a variety of blockchain platforms that are less centralized.
Ripple currently owns 55% of the circulating XRP supply, and this is after the $1.3 billion raised from sales of XRP.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.