- Ripple and its co-founders have been hit with charges of operating an unregistered securities sale by the SEC
- The Ripple SEC lawsuit charges came 24 hours after co-founder and CEO Brad Garlinghouse announced that he was expecting them
- XRP has been temporarily delisted by Beaxy as a result
Ripple has been hit with a lawsuit by the Securities and Exchange Commission (SEC) just a day after Ripple CEO Brad Garlinghoue predicted such an eventuality. The commission accuses Ripple founders Brad Garlinghouse and Chris Larsen of selling unregistered securities in a series of accusations that have been labeled by one commentator as “the most fraud-like non-fraud filing I think I’ve seen.” As a result of the filing, cryptocurrency exchange Beaxy has halted XRP trading, citing “an obligation to operate with regulatory compliance”.
Ripple SEC Lawsuit Alleges Withholding of Information
The filing of the Ripple SEC lawsuit was no surprise after Garlinghouse publicly announced such an expectation yesterday, perhaps leaving the SEC with no choice but to file so soon. The SEC accuses Garlinghouse and Larsen of raising $1.3 billion for the project through an unregistered securities offering, arguing that XRP was effectively a seven-year ICO starting in 2013.
Among the litany of alleged wrongdoings is the suggestion that Larsen and Garlinghouse failed to inform investors of the full facts about the project, withholding certain information and therefore not providing potential investors with all the data required to make an informed investment decision.
Execs Only Served to Enrich Themselves
The upshot of Ripple’s wrongdoings was, in the SEC’s words, to financially benefit Garlinghouse and Larsen to the detriment of retail buyers. The case also lays bare what has been known for some time – that Ripple had to pay companies like MoneyGram to use XRP in their transactions because using XRP natively was too expensive for MoneyGram.
Tech lawyer Stephen Palley dissected the Ripple SEC lawsuit in detail last night, summarizing that the case was “full of evidence about market manipulation and control”, adding that it was “hard to ignore” the possibility of further, more serious charges down the road.
So, this Ripple lawsuit, let’s talk about it, shall we? pic.twitter.com/kq8NLtrJ5x
— Palley (@stephendpalley) December 22, 2020
Beaxy Delists XRP Until Decision is Made
Cryptocurrency exchanges took swift action after the Ripple SEC lawsuit was brought, with Beaxy opting to temporarily delist the XRP token until the lawsuit was resolved. Naeem Master, Beaxy’s Head of Operations, explained the decision and its rationale in an email to FullyCrypto:
The SEC and Ripple Labs have been debating XRP’s legal status for years. So the recent news coming from Ripple’s CEO wasn’t unexpected. That being said, Beaxy Exchange has an obligation to operate with regulatory compliance as a priority. In this case, that means halting all trading of XRP on Beaxy until a determination is made that designates XRP as being or not being an unregistered security.
Garlinghouse has already stated his desire to fight the Ripple SEC lawsuit, suggesting that the matter may not be resolved until 2021 at the earliest, if Ripple’s other lawsuits are anything to go by.