Ripple Lawsuit Details Released by SEC, Resulting in Immediate Fallout

Yesterday afternoon, we reported on recent commentary by Ripple CEO, Brad Garlinghouse, indicating that a lawsuit put forth by the SEC would soon be announced.  Today, more details have emerged, shedding light on what charges are being laid, in addition to the associated fallout.

The Details

Not only is Ripple being charged, but so are two executives at the company.

• CEO, Brad Garlinghouse
• Cofounder, Christian Larsen

The charges put forth by the SEC allege that both Ripple, and the listed individuals, have taken part in an ongoing $1.3 billion USD unregistered digital securities offering.

Not only were these funds raised through the sale of XRP, the SEC indicates that each individual sold personal stores of XRP, totaling roughly $600 million, in another instance of unregistered securities.

The SEC states,

“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple's business and other important long-standing protections that are fundamental to our robust public market system.”

The XRP Fallout

The potential for regulatory enforcement on Ripple has been lurking for so long now, that it appears people forgot this was a potential issue.  As a result, the company was able to continue operations, building its community, and growing rapidly.  Now that the lawsuit is officially real, the fallout has been immediate, and dramatic.

In the hours leading up to, and following the announcement, XRP tokens have plummeted in value.  This loss in value has seen its market cap drop by billions of dollars, resulting in Tether reclaiming the #3 spot on most marketcap rankings.

Suspended Trading

In addition to XRP prices plummeting, the token is beginning to see exchanges delisting the asset.  While the lawsuit put a focus on Ripple and its two top executives, any exchange to have supported the asset has potentially taking part in illegal activity – knowingly or not.

So far, the following are just a few of the exchanges to have put a hold on XRP trading activity.  No doubt, more will soon announce similar actions.

• CrossTower
• Beaxy
• OSL

The Upside

Despite the grim state of affairs surrounding Ripple and XRP, there is always the possibility that they could win this lawsuit – however unlikely.  If this comes to be, then it will be a momentous moment for the company and others in similar positions.

To date, Ripple has managed to develop a global brand with real industry adoption, despite this issue lingering overhead.  Despite the growth seen by the company over this time, there has no doubt been a drove of would-be investors kept at bay, waiting for clarity on XRP’s regulatory status before jumping into the fray.  If Ripple wins, and XRP is not deemed a security, there will be nothing holding back those that have been apprehensive to date.

While the situation may appear dire at this point in time, the situation is not as clear cut as many cases taken on by the SEC.  Due to the unique structuring and relationship between Ripple and XRP, the SEC may just have a difficult time proving its case – at least this is what Ripple is banking on.