U.S. SEC Files Lawsuit Against Ripple Labs, Alleging Ripple's Securities Issuance Violation

SEC "Did not follow legal solicitation procedures"
"At least $1.38 billion Ripple sales"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Ripple Labs, which led the launch of Ripple (XRP), ranked as one of the world's top three cryptocurrencies alongside Bitcoin and Ethereum, and the company's founders have been sued by the U.S. Securities and Exchange Commission (SEC) for violating investor protection regulations, Bloomberg reported on the 22nd (local time).

According to the report, the SEC filed a complaint in the Manhattan Federal Court on the same day, stating that Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen must return the profits gained from Ripple sales along with fines. The SEC claimed that the cryptocurrency Ripple was traded as an illegal security without properly undergoing the legal public offering process, alleging sales of Ripple worth at least $1.38 billion.

It was reported that CEO Garlinghouse and founder Larsen ignored legal advice that cryptocurrency sales could constitute investment contracts and thus be securities, continuing their transactions regardless. The SEC pointed out, "From a financial perspective, there have been years of unregistered securities trading."

Ultimately, the key issue in this lawsuit is expected to be whether the cryptocurrency Ripple will be classified as a security. The Wall Street Journal (WSJ) explained that although Ripple is a cryptocurrency like Bitcoin, it has a clear development entity rather than an anonymous developer, and the SEC has not previously classified Bitcoin or Ethereum as securities.

Ripple was launched in 2012 under the leadership of Ripple Labs' founders. Although the company later handed over control to an independent developer network, it still holds 6.4 billion Ripple tokens. Ripple's legal counsel argued, "Ripple is one of the top three cryptocurrencies with daily trading volumes reaching billions of dollars, and like Bitcoin or Ethereum, it is a currency," adding, "It is different from the initial coin offerings (ICO) that the SEC has dealt with so far."

The WSJ reported that while the SEC has filed lawsuits against companies issuing cryptocurrencies for illegal securities issuance violations and mostly won, none involved cryptocurrencies as large in scale as Ripple.

This content was produced with the assistance of AI translation services.