Explained: Ripple vs. US SEC Lawsuit
Between 2013 and 2020, Ripple Labs raised USD 1.3 billion by selling XRP coins. The Securities and Exchange Commission (SEC) had not indicated that Ripple Labs was being investigated when it filed a complaint against the company at the end of 2020. At the time, Ripple was already traded on over 200 exchanges.
What had happened?
Although XRP tokens were not registered securities, the SEC says that Ripple Labs sold them to raise more than $1.3 billion in funds. According to the SEC lawsuit, Ripple Labs also sold $600 million in unregistered XRP to individuals. Larsen and Garlinghouse, according to the lawsuit, performed personal unregistered XRP transactions totaling about $600 million, as well as structuring and promoting the XRP sales used to finance the company’s activities.
Ripple’s response:
The SEC received no response from Ripple Labs for 39 days.
However, the blockchain company quickly took to Twitter to clarify the company position, purge its image and maintain investor trust.
Garlinghouse proclaimed that the SEC’s battle was not just against Ripple but the entire blockchain industry.
He elaborated on how Ripple Labs worked with the SEC to avoid regulatory infringements.
He even explained to Ripple Labs’ employees that XRP wasn’t an investment vehicle and token holders were fully insulated from any entitlement to the company’s profits.
It’s just incredible that the SEC, a US regulator, is in the business of picking winners in this industry (or any industry) and disadvantageous companies here in the US” declared the blog.
More importantly, Garlinghouse confidently stated, “We are not only on the right side of the law, but we will be on the right side of history.”
The Ripple CEO also mentioned that US investors accounted for only 5 percent of Ripple’s market capitalization at the time, which meant that their influence on the market and regulatory watchdogs would be negligible.
Till Now
Both the Ripple and the SEC cases have had significant motions denied by the court, therefore the final verdict in Ripple vs SEC is still waiting. The SEC’s request to dismiss Ripple’s fair notice defense was denied, and Ripple’s motion said that no fair notice was provided to show the illegal coin distribution in the exceedingly volatile cryptocurrency market.
However, there are rumors that the Ripple vs. SEC case will be settled in 2022, albeit no specific day or month has been specified. Supporters of the Ripple lawsuit are already hopeful about winning the case against the SEC, despite the lengthy wait in presenting evidence.
What the future holds?
The US Securities and Exchange Commission (SEC), which has filed a lawsuit against blockchain company Ripple Labs Inc, is in charge of the future of cryptocurrencies. According to Fox Business, the decision would be a landmark judgment regarding SEC’s authority over this space.
According to the lawsuit, which was submitted on December 22, 2020, Ripple is accused of illegally raising around $1.3 billion. Christian Larsen, Ripple’s co-founder, and Bradley Garlinghouse, Ripple’s current CEO, are also named as defendants in the SEC action, saying that they benefitted handsomely from the fraud.
If the SEC wins the lawsuit, XRP (the Ripple Blockchain’s native cryptocurrency) would be classified as a security rather than a currency in the United States. As a result, other cryptocurrencies may be categorized as securities as a result of this decision. As a result, the lawsuit against Ripple is critical for all crypto participants, including investors, blockchain developers, and governments, all over the world.