The SEC filed a lawsuit against Ripple labs today, the lawsuit is also against co-founder Christian Larsen and incumbent CEO Brad Garlinghouse.
The lawsuit alleges that Ripple raised $1.3B in unregistered securities offerings since 2013. Security is an investment contract; if the creators of a cryptocurrency advertised it as an investment to US buyers, then the SEC considers the coin to be a security under US law.
“The defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws,” the SEC stated in a press release.
The SEC alleged that Ripple’s periodic sale of the 48.2B XRP it holds in a secured account constitutes the sale of an unregistered security. Ripple states that it sells the XRP to “increase XRP liquidity and strengthen the overall health of XRP markets.”
XRP is the 3rd largest cryptocurrency by market cap, which is $20.7B.
The SEC stated that Larsen and Garlinghouse helped the structure and promote sales of XRP, and “effected personal unregistered sales of XRP to around $600M.”
The SEC already sued many crypto companies for having unregistered securities sales, including Black. One, which raised $4B to create the EOS blockchain, and Telegram which returned to investors $1.7B it raised in an ICO for its since abandoned blockchain project, the Telegram Open Network. The aforementioned companies also settled with the SEC.
Brad Garlinghouse predicted the suit yesterday by discussing it in Fortune and The Wall Street Journal. The charges included “an attack on the entire crypto industry and American innovation,” he said.
XRP’s price dropped after Garlinghouse announced the suit. In the last 24 hours, the price of XRP dropped by 10.48%, to $0.46. After the SEC’s announcement, XRP’s price dropped by two cents.
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