Digital Assets: Clayton’s Parting Shot At Crypto – SEC To Sue Ripple
Ripple, which is associated with XRP, said Monday it expects to be sued by the SEC.
The SEC will likely sue Ripple, CEO Brad Garlinghouse, and co-founder Chris Larsen, according to Fortune.
The SEC will charge the defendants for selling XRP tokens, which it alleges are unlicensed securities. XRP ranks third in the pecking order of cryptocurrencies with a market cap of $23 billion.
The SEC would make the case that XRP is a security and should have been registered as an investment contract prior to its sale.
SEC: XRP is a security
While bitcoin and ethereum are created by decentralized mining, Larsen and others created 100 billion XRPs in 2012 for Ripple Labs.
Ripple holds 55 billion XRPs in escrow but sells chunks of 1 billion of these currency reserves every month.
This escrow could be worth nearly $25 billion according to Coin Telegraph.
It is Ripple’s stand that XRP has, over the years, become decentralized by virtue of its use as a bridge currency in cross-border transactions. Further, it does not have discretionary power in the utilization of the escrowed XRPs.
The suit against Ripple will launch at a time when Clayton and other senior SEC officials are about to leave the office.
“Clayton did this with one foot out the door,” alleged Garlinghouse to Fortune. “Rather shamefully, he has decided to sue Ripple, and leave the legal work to the next chairman.”
SEC’s allegation that Ripple violated U.S. laws by not registering the token with the SEC before listing it doesn’t cut much ice with Garlinghouse.
In an e-mailed statement by a Ripple spokesman, Garlinghouse said:
“The SEC is fundamentally wrong as a matter of law and fact. XRP is a currency and does not have to be registered as an investment contract. In fact, the Justice Department and the Treasury’s FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.”
“The SEC has permitted XRP to function as a currency for over eight years, and we question the motivation for bringing this action just days before the change in administration.”
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