Ripple, the company behind the third largest cryptocurrency XRP, is awaiting a lawsuit from the United States Securities and Exchange Commission (SEC). The FinTech firm is being accused of selling unlicensed securities in the form of its XRP tokens.
The U.S. Securities and Exchange Commission (SEC) will file a lawsuit against Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen, according to a statement from the CEO. They claim the company violated laws against the sale of unregistered securities when it sold XRP to investors. Ripple expects the lawsuit to be filed before Christmas.
Update 12.23.2020: The SEC has now officially filed its lawsuit, more details here.
Attack on the crypto industry?
CEO Garlinghouse believes the lawsuit is “fundamentally wrong as a matter of law and fact.” Ripple will be challenging the SEC’s lawsuit, saying it was discrimination against the company. In a tweet, he called the lawsuit an “attack on the crypto industry” as a whole.
Today, the SEC voted to attack crypto. Chairman Jay Clayton – in his final act – is picking winners and trying to limit US innovation in the crypto industry to BTC and ETH. (1/3) https://t.co/r9bgT9Pcuu
— Brad Garlinghouse (@bgarlinghouse) December 22, 2020
The SEC is treating Ripple unfairly because the two top cryptocurrencies, Bitcoin and Ethereum, were also not classified as securities, according to Garlinghouse. Securities, in this context, are defined as financial instruments that represent a stake in a company, as opposed to a mere currency. The CEO argued that XRP is a standalone cryptocurrency with a heavily used and decentralized network, not a security.
Still, nearly 60 billion of the total 100 billion tokens are owned by Ripple and selling them on the market is central to the company’s financial strategy. However, Garlinghouse remains convinced that XRP is a legitimate alternative to “Chinese-controlled” Bitcoin, according to a recent document.
Reaction of the crypto community
Although Ripple spoke of an attack on the entire industry, the majority of the community sided with the SEC. Many agreed that XRP should indeed be classified as a security, which would make the lawsuit justified. Lawyer Jake Chervinsky even thought a delisting on the largest centralized exchanges (CEX) was possible. Some were also of the opinion that XRP is a scam anyway and should not be counted as part of the crypto industry at all.
Well even though I didn’t wake up to a new ATH, this still got a smile on my face though.
Literally everyone in crypto knew how $XRP (a security) got dumped on retail by Ripple and no this is not an attack on “crypto”, this is an attack on scammers. 🤷♂️https://t.co/oq7JlgDIv7
— WhalePanda (@WhalePanda) December 22, 2020