Ripple faces SEC lawsuit over XRP sale valued at $1.3B over 7 years

The Securities and Exchange Commission (SEC) is suing Ripple, the company behind the cryptocurrency XRP, alleging it violated federal securities laws. The regulator claims it conducted a $1.3B unregistered securities offering.

Why should we care?
News of the SEC lawsuit against Ripple, one of the most valuable companies in the crypto industry, resulted in a sharp decline in XRP’s value. The SEC is suing Ripple and CEO Brad Garlinghouse and co-founder Chris Larsen, and the complaint alleges that XRP is a security that should have been registered with the SEC prior to the sale of billions of XRP to retail investors. Registration would involve tighter controls, including disclosures about the company’s business model and financial condition. Ripple has turned over control of the cryptocurrency to a network of independent developers, but questions loom over the company’s ownership of 55 billion of the 100 billion XRP tokens in existence. The SEC is seeking an injunction, disgorgement with prejudgment interest, and unspecified civil penalties from Ripple. “XRP is a currency, and does not have to be registered as an investment contract,” Ripple CEO Brad Garlinghouse said earlier this week in a statement quoted by CNBC. “In fact, the Justice Department and the Treasury’s FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.”