We’ve reported that on December 22, The Securities and Exchange Commission (SEC) has charged Ripple — the company closely associated with the cryptocurrency XRP — along with its executives Brad Garlinghouse and Christian Larsen for selling over $1.3 billion worth of XRP as securities to the public.
The fallout was immediate with investors dumping XRP causing a 3-day crash of more than 50%.
Bitwise eliminated XRP from its crypto index fund.
Bitstamp suspended trading in XRP for U.S. residents.
As to be expected, Ripple has something to say about the SEC charges.
Ripple’s CEO Brad Garlinghouse tweeted that the SEC is unjustifiably attacking crypto and blasted chairman Jay Clayton’s decision to sue his firm right before the holidays.
“Jay Clayton is taking notes from the Grinch this holiday season, leaving the actual legal work to the next administration,” Garlinghouse said, referring to the chairman’s departure at the end of Trump’s presidential tenure.
Ripple has formally responded with a 6 page statement that states:
A. The SEC’s theory, that XRP is an investment contract, is wrong on the facts, the law and the equities.
B. To prove its case amounts to an unprecedented and ill-conceived expansion of the Howey test and the SEC’s enforcement authority against digital assets.
C. The SEC’s theory that XRP is an investment contract ignores the economic reality that XRP is, and has long been, a digital asset with a fully functional ecosystem and a real use case as a bridge currency that does not rely on Ripple’s efforts for its functionality or price.
D. XRP is a currency. XRP is similar to bitcoin and ether, which the SEC has determined are not securities. 1. By alleging that Ripple’s distributions of XRP are investment contracts while maintaining that bitcoin and ether are not securities, the Commission is picking virtual currency winners and losers, destroying U.S.-based, consumer-friendly innovation in the process.
E. This case is distinguishable from the Initial Coin Offering (“ICO”) and/or Simple Agreements for Future Tokens (“SAFTs”) cases that the Commission has brought previously, which involved no developed ecosystem or established utility for the underlying asset, and where the tokens were sold directly to purchasers by the issuer based on promises of profits and ongoing efforts that were articulated in white papers and other forms.
You can read the entire Ripple response here.