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SEC Lawsuit Filed Against The XRP Firm

The Securities and Exchange Commission (SEC) has charged Ripple — the company closely associated with XRP — along with its executives Brad Garlinghouse and Christian Larsen for selling as well as the ongoing sale of over $1.3 billion worth of XRP to the public.

In the filing, the SEC charged since 2013 up to the present time, the defendants have sold over 14.6 billion XRP in return for cash or other consideration to fund Rippleā€™s operations. 

The SEC said Ripple never filed a registration document, and, therefore, it never provided investors with information all companies that sought investment from the public regularly supplied.

The SEC lawsuit alleges that Ripple broke securities laws by selling XRP directly to consumers across exchanges. According to the complaint filed by The Alliance for Financial Innovation (AFI), Ripple acted in bad faith by not requiring users to sign a disclaimer when offering the discounted currency. Additionally, according to the complaint, Ripple instructed investors to disregard the “Ripple Statement” which is issued by the SEC when promoting the discounted currency. In addition, the complaint claims that Ripple promoted the statement on its website and in emails to customers without disclosing that the advertising was deceptive and in violation of Securities and Exchange Commission (SEC) guidelines. As a result, for lack of any express requirement that customers sign a disclaimer or other agreement, investors have reportedly been sending money to the XRP office for their own private investments. As a result, due to the lack of a disclaimer, the SEC found that Ripple broke securities laws by advertising the discounted currency and not requiring users to purchase a product as a security in advance of making a purchase.

The SEC on Wednesday formally sued Ripple, alleging that its co-founder Christian Larsen and CEO Bradley Garlinghouse “created an information vacuum” that allowed them to sell XRP into a market that only had information they chose to share.

According to the SEC’s lawsuit, the duo ignored legal advice that the cryptocurrency could be considered an investment contract and therefore was a security.

“From a financial perspective, the strategy worked,” raising at least $1.38 billion “over a years-long unregistered offering of securities,” the SEC said. “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.”

Larsen and Garlinghouse both fervently have denied the SEC’s allegations, publicly arguing that XRP is a currency and should not have to be registered with the SEC as an investment contract. The company has also questioned the lawsuit’s timing – SEC Chairman Jay Clayton is soon to step down – and said the U.S. government and other regulators had previously given XRP currency status.

CEO of Ripple