The US Securities and Exchange Commission (SEC) has sued Ripple for raising more than USD 1.3 billion through an unregistered securities offering.
Ripple’s former CEO and founder Christian Larsen, and its current CEO Bradley Garlinghouse are being sued for violating securities laws by selling XRP over seven years starting in 2013. According to the complaint, the ‘illegal securities offering’ created an information asymmetry for XRP buyers, according to The Verge.
The suit is based on whether XRP is a security or a currency. According to the SEC’s suit, it’s a security, and thus Ripple didn’t provide its investors with the proper information they needed to assess any potential risk. According to Ripple’s current CEO, XRP is a virtual currency, which means the SEC has nothing to do with it. The SEC has previously ruled that Bitcoin and Ethereum are currencies. Also, the Justice Department treated XRP as a currency in 2015, when Ripple settled a suit over its business, the online publication ads.
But XRP is different from Bitcoin and Ethereum because 100 billion XRP units were created all at once, and not through mining, which is an ongoing process. Ripple owns about 6.4 billion XRP, and Garlinghouse and Larsen also own a good chunk of it. Another 48 billion XRP are held in reserve, for periodic sales. This difference may be why the SEC is claiming XRP is a security, not a currency, The Verge says.
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