The case for cryptocurrencies were dealt a blow this afternoon when the Securities and Exchange Commission formally announced that they had charged Ripple and two executives for raising $1.3 billion via unregistered securities offerings. The charge relates to the cryptocurrency Ripple, which is also known as “XRP”, its symbol on cryptocurrency exchanges.
Within the release, the SEC alleges that Christian Larsen and Bradley Garlinghouse, whom are chairman and CEO of Ripple respectively, have raised funds to finance the company’s business via unregistered and ongoing digital asset securities offerings. Distribution of the currency was also provided for non-cash considerations including market-making services and labor.
The report also alleges that the two executives conducted personal sales of the currency to the tune of $600 million, without making required filings related to the offer and sale of the currency or fulfilling any required registrations.
“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
Ripple as well as the two executives have been charged with violating the registration provisions included under the Securities Act of 1933, with the agency seeking civil penalties, injunctive relief and disgorgement with prejudgement interest.
The implication here, for obvious reasons, is that the action by the SEC deals a blow to the cryptocurrency space as a whole. Largely, the appeal of such currencies in general is the lack of oversight from any one government body, with crypto assets being viewed as being “decentralized” and not tied to any one fiat currency. However, if governments begin cracking down on such currencies and demanding regulations be put in place, the appeal will be lost for many.
Information for this briefing was found via the SEC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
The Grocery Grift: Why Toronto and New York Are About to Light Taxpayer Money on Fire