Fintech company Ripple, famous for the virtual currency XRP, said it expects to be sued by the Securities and Exchange Commission for violating investor protection laws.
Summary
- The SEC plans to file a lawsuit against Ripple, alleging that it violated laws prohibiting the sale of unregistered securities when selling XRP to investors.
- Ripple CEO Brad Garlinghouse called the SEC case “fundamentally flawed in law and fact,” questioning the timing.
- XRP plunged sharply on news of an expected SEC lawsuit, while the cryptocurrency fell more than 17% to around 46 cents.
Cryptocurrency Firm Ripple Expects to be Sued by the SEC; XRP Plunges
Ripple CEO Brad Garlinghouse has said that the U.S. Securities and Exchange Commission (SEC) lawsuit over XRP “will have an answer in the first half of next year.” The executive insisted that xrp is not a security, stressing that the matter “impacts the entire industry” and that “everybody realizes how important this is.”
Ripple’s CEO Expects Answer in First Half of Next Year.
Brad Garlinghouse spoke about the U.S. litigation timeline at the D.C. Fintech Week event. Bloomberg reported on Tuesday to the Securities and Exchange Commission (SEC) about the sale of XRP.
Admitting that the pace of court proceedings is difficult to predict, Garlinghouse said:
“I think we’ll have an answer in the first half of next year. We shall see whether that’s the first or second quarter.”
Garlinghouse said that Ripple would consider a settlement with the SEC if regulators decide XRP is not a security. The executive stressed that the XRP lawsuit “is about the industry as a whole.”
SEC sued Ripple, Garlinghouse, and co-founder Chris Larsen in December 2020. The claim was that they raised over $1.3 billion through their ongoing unregistered XRP offering for digital assets. Ripple motioned to dismiss the lawsuit, arguing that the XRP token is not a security. Meanwhile, the SEC has asked the court to rule in its favor without trial.
In July, Garlinghouse said:
“I think the SEC has overstepped significantly… I think they’ve seen this gray area. They’re like, ‘Hey, let’s get in.'” Ripple’s chief executive repeated.
“It’s frustrating that it’s taking so long. Many companies realize this incident’s importance to the industry.”
Why Does the Lawsuit Matter?
XRP is one of the world’s most valuable cryptocurrencies, with a market cap of over $20 billion. It was created and distributed by the founders of Ripple in 2012. It aims to facilitate fast cross-border payments.
Ripple argues that XRP should be classified as a currency similar to Bitcoin. It should not be registered as an investment contract. The company was previously privately valued at $10 billion. It is backed by Japanese financial services giant SBI Holdings and Spanish bank Santander. Top venture capital firms such as Andreessen Horowitz, Lightspeed, and Peter Thiel’s Founders Fund.
The “safe” label is important as it could put XRP under strict new rules. This could seriously affect Ripple. Despite claiming to be crypto-independent, Ripple owns 55 billion of the total 100 billion XRP tokens. The company makes money by selling a portion of its XRP holdings each quarter.
Ripple has threatened to move its headquarters out of the U.S. over the issue, citing London, Switzerland, Singapore, Japan, and the United Arab Emirates as potential locations. XRP plummets after news of expected SEC lawsuit. The cryptocurrency fell more than 17% to about 46 cents on Tuesday.
