US Security and Exchange Commission (SEC) has filed a $1.3 billion lawsuit against Ripple, CEO Brad Garlinghouse, and co-founder Christian Larsen for conducting security offerings.
According to a press release by SEC, the lawsuit filed in a Manhattan court on Wednesday, December 23, alleges that Ripple Labs, the company behind the XRP coin, raised over $1.3 billion through an unregistered, ongoing digital asset securities offering since 2013.
SEC complaint, filed in the court, reads:
“From at least 2013 through the present, Defendants sold over 14.6 billion units of a digital asset security called “XRP,” in return for cash or other consideration worth over $1.38 billion U.S. Dollars (“USD”), to fund Ripple’s operations and enrich Larsen and Garlinghouse. Defendants undertook this distribution without registering their offers and sales of XRP with the SEC as required by the federal securities laws, and no exemption from this requirement applied.”
The news of this lawsuit was already popping up on the media. In a publication on Tuesday, Ripple CEO Brad Garlinghouse said that was wrong as a matter of law. According to Brad, XRP is not a security and it has been confirmed by major branches of the U.S. government, including the Justice Department and the Treasury Department’s FinCen.
Ripple has always presented XRP as currency just like Bitcoin and Ethereum. That’s why the company is of the view that XRP falls outside the scope of the federal securities laws. Brad wrote:
“XRP is not an “investment contract.” XRP holders do not share in the profits of Ripple or receive dividends, nor do they have voting rights or other corporate rights. Purchasers receive nothing from their purchase of XRP except the asset. In fact, the vast majority of XRP holders have no connection or relationship with Ripple whatsoever.”
SEC said that in 2012, Ripple received legal advice that “under certain circumstances XRP could be considered an “investment contract” and therefore a security under the federal securities laws.” But Ripple ignored that advice and initiated a large-scale distribution of XRP without registration.
SEC further alleges Brad and Larsen “orchestrated these unlawful sales and personally profited by approximately $600 million from their unregistered sales of XRP.” SEC has charged Ripple for the violation of the registration provisions of the Securities Act of 1933 and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.
Furthermore, in a Wells Submission, Ripple has called Bitcoin and Ethereum “Chinese-controlled” cryptocurrencies. Ethereum co-founder Vitalik Buterin blasted Ripple for these claims and called XRP a shitcoin.
In his tweet, he said:
“Looks like the Ripple/XRP team is sinking to new levels of strangeness. They’re claiming that their shitcoin should not be called a security for *public policy reasons*, namely because Bitcoin and Ethereum are “Chinese-controlled.”
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