The Securities and Exchange Commission filed charges Tuesday against Ripple, the fintech company best known for cryptocurrency XRP, and two of its executives, for allegedly violating investor protection laws.
The SEC alleged that Ripple, co-founder Christian Larsen and CEO Bradley Garlinghouse, raised more than $1.3 billion through an unregistered securities offering.
“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,” Stephanie Avakian, director of the SEC’s Enforcement Division, said in a press release.
Garlinghouse had expected a lawsuit to be filed before Christmas. In a statement late Monday, he said the expected SEC’s suit was “fundamentally wrong as a matter of law and fact” and questioned its timing.
“XRP is a currency, and does not have to be registered as an investment contract,” Garlinghouse said.
XRP was created and distributed by the founders of Ripple in 2012, and is designed to facilitate fast cross-border payments. The value of the currency against the U.S. dollar has approximately doubled since early November, thanks to a spike in the latter part of that month, but it’s still down more than 80% from its peak in late 2017, while rival cryptocurrency Bitcoin recently hit an all-time high.
The company was last privately valued at $10 billion and is backed by the likes of Japanese financial services giant SBI Holdings, Spanish bank Santander and top venture capital firms including Andreessen Horowitz, Lightspeed and Peter Thiel’s Founders Fund.
— CNBC’s Ryan Browne and Kate Rooney contributed to this report.
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