After Ripple Labs revealed on Monday that the Security Exchange Commission (SEC) would soon file a lawsuit against the company for conducting a sale of unregistered securities, the SEC has now indeed followed up with official charges against Ripple CEO Brad Garlinghouse and co-founder Chris Larsen, alleging the firm raised "over $1.3 billion through an unregistered, ongoing digital asset securities offering."
In a press release published on Tuesday, SEC Enforcement Division Director Stephanie Avakian commented on the matter, "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."
Ripple's "pre-announcement" caused a massive reaction across the wider digital currency space, not least because the firm claimed in an official document that "the Bitcoin and Ethereum blockchains are highly susceptible to Chinese control."
XRP, the digital currency in question to be an unregistered security, has a market capitalization of just below $21 billion, after the coin's price shedded ten percent following the news. Kitao Yoshitaka, president of Ripple partner SBI Holdings, showed himself confident in Ripple, however, stating that the Japanese financial regulator FSA had previously ruled that XRP was not a security.
Lawyer Jake Chervinsky commented on the developments that a security ruling would render XRP "useless," adding that he found it "remarkable" that the SEC is suing not only Ripple Labs, but also its individual executives.
Investor's Podcast Network host Preston Pysh called the news "predictable," reiterating the importance of Bitcoin's network of full nodes.
On a similar note, Castle Island Ventures Partner Nic Carter stressed in a tweet thread that XRP should not be compared to Bitcoin as it is "not remotely in the same category."
Should XRP be declared a security, the consequences could expand beyond Ripple Labs, as it would force cryptocurrency exchanges that are facilitating XRP trades to delist the asset. Some believe delistings could take place even before a verdict is reached.
The SEC now seeks "injunctive relief, disgorgement with prejudgment interest, and civil penalties."
At the BTC Times, we decided to responsibly cover news about altcoins from time to time, provided that we consider them relevant for Bitcoin or interesting for our readers. The goal of these articles will always be to inform, explain, clarify, debunk, and expose, sticking to the objective facts and qualified technical opinions, and never to promote, advertise, or legitimize "coins", "tokens", or other investment propositions.