The United States Securities and Exchange Commission claims that Ripple has been offering unregistered securities offering since 2013. SEC made the charges not only against Ripple but also its CEO Brad Garlinghouse and co-founder Christian Larsen.
From the charges made at the federal district court in Manhattan, the commission maintains that the XRP token is a security and was illegally distributed for labor and marketing services. The two executives Garlinghouse and Larsen, were in the spotlight for not registering their personal XRP sales, which were estimated to be $600 million. The lack of transparency about XRP and its businesses deprived potential client’s adequate information.
According to the SEC rules, all individuals or crypto firms must register all their public offerings unless they are a security. It has, however, been so confusing on which tokens qualify as securities. The crypto community has been raging for clarification from the SEC or a new law on the subject for some time now.
From SEC’s judgment, the two executives did not register XRP when it was still part f Ripple for selfish gains. The firm and the accused leaders face severe penalties that could lead to disgorgement of their profits in addition to civil penalties.
Just as expected, the lawsuit’s announcement was followed by a drop in the price of XRP. The token fell more than 20% last week, and currently, XRP is valued at $0.45.
Garlinghouse responded to the allegations on Twitter as a plot by SEC to attack crypto. He added that SEC is not pushing for innovation as it is attacking many tokens and not just XRP. The commission’s FinHub is taking the direction of a stand-alone office, and that speaks volumes.
According to Yoshitaka Kitao, a Ripple board member and SBI Holdings CEO, Ripple has high chances of prevailing in the final ruling. It is not only SEC that believes XRP is not a security, but Japan’s financial watchdog found out the same.
The CTO of Ripple, David Schwartz, thinks that the United States will always try to catch up with you even after doing everything right and tell you something wrong you did that you had no idea about.
Garlinghouse still thinks that most of RippleNet customers do not live in the United States, and thus the lawsuit will not affect the regular running of the business. At the beginning of the year, Larsen indicated that it had plans to move outside the US despite the regulatory issues.
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