Rumors made the rounds yesterday that the United States Securities and Exchange Commission was planning to sanction Ripple, a payments company based in San Francisco. However, what started as a rumor has grown to become official as SEC has recently announced that it has slammed Ripple with the rumored lawsuit.
According to the regulatory body, Ripple hosted and sold unregistered security when it launched up till this very day. The lawsuit further names Ripple CEO Brad Garlinghouse and co-founder Chris Larsen as the person of interest in the case they built up against the company.
SEC claims that Ripple sold unregistered securities
In the filed report, the United States Securities and Exchange Commission claimed that starting from 2013 when the company launched, it has sold nothing less than 14.6 billion units of XRP while receiving cash for the asset’s sales.
The regulatory body also claims that Ripple has gotten funds of about $1.38 billion for the sales of the asset and has, in turn, used the money gotten from the sales to fund their operations across the country and increase the wealth of the two people involved in the lawsuit, Garlinghouse, and Larsen. The SEC said that when they were about to begin the sales of the assets, they were not promptly and duly notified and that one action has seen them breach the federal securities law in the country.
The SEC also mentioned that they did not apply for an exemption to register their asset as securities before going on to sell them to investors. The United States Securities and Exchange Commission mentioned that the defendant went ahead to sell the securities to investors without letting them in on the kind of investment they were investing their funds.
SEC says that Garlinghouse and Larsen defied legal counsel warning
The SEC also mentioned that they were supposed to print out an official publication on how investors would benefit from investing in the securities, but they refused. The SEC said that instead of doing that, they gave investors brief information and made the asset that it was only the two people involved in the project that would stand to gain more.
The regulatory body also mentioned that Ripple started selling the securities even though various legal counsel earlier notified them in 2012 that their assets could be considered an investment contract, making it security under the United States law. The SEC also mentioned that Garlinghouse and Larsen used the money gotten from the investment to find Ripple without disclosing how they were doing that.
In a rebuttal, Ripple has said that the SEC is failing to see the clear picture and is biased if they are classifying XRP as securities and Bitcoin and Ethereum cryptocurrencies. Even though Ripple’s earlier publication claims that the firm will fight the lawsuit, it is only a matter of time before we know what happens next.