The SEC offensive against Ripple and its XRP token has started. The regulator considers that the issuance of the cryptocurrencies was an undeclared digital asset offering. The two founders are also pinned for personal sales of XRP.
Unusually, Ripple CEO Brad Garlinghouse announced the SEC lawsuit even before it was formalized. The value of XRP fell sharply. Even before the regulator’s announcement, however, the CEO was giving himself the opportunity to make his own case.
However, his word is now thwarted by the official accusations of the stock exchange regulator. Thus, unlike Ethereum and Bitcoin, XRP is a financial asset or security. As such, its issuance had to be declared beforehand.
For the SEC, this position of authority therefore poses a serious threat. Its managers are exposed to the payment of a very heavy fine if found guilty.
According to the Commission, Ripple and its two founders are guilty of having raised more than $1.3 billion from investors in 2013. How did they do it? Through an “unregistered and continuous offering of securities of digital assets”.
But this is not the only fault of the issuer of the 3rd cryptocurrency by market cap. The SEC also points to the distribution of Ripple’s XRP in return for “work and market-making services”. The two executives are also personally implicated.
Brad Garlinghouse and Christian Larsen are accused of personal sales of $600 million worth of tokens. These token sales are not prohibited, but the SEC says they should have been reported.
The Authority therefore believes that potential purchasers of XRP did not receive the necessary information from Ripple. Nor would they have received “significant” and “fundamental” protections.
For the company and the holders of XRP, the consequences of this complaint are immediate. Even before any judgment is rendered. This week, the value of the cryptocurrency has already dropped by more than 50%.
And for Ripple and its founders, a sword of Damocles now hangs over their heads. Garlinghouse has retaliated and tried to federate users around the company. The results are very mixed, however.
For the CEO, it is the entire crypto industry that is being targeted by the SEC’s action. “It’s not just XRP that they are attacking here,” he insists. As for the SEC, it must even take on the role of threat to innovation in the United States.