Ripple’s being investigated by the SEC – here’s what you need to know
In the wake of the SEC's lawsuit against Ripple, XRP's value has continued to plunge, dropping by over 50% over the course of the last 7 days.
- Prominent exchanges that have delisted XRP to date include Coinbase, Bittrex, Crypto.com, Bitstamp, OKCoin, Beaxy, OSL and CrossTower.
- Ripple CEO Brad Garlinghouse has continuously reiterated that he will "aggressively fight" the SEC's actions in court.
- If the SEC is successful in its prosecution efforts, XRP may not be able to recover from such a blow.
Riding on the coattails of the recent bullish wave, on 24 November, XRP was able to scale up to a price point of $0.90 on Coinbase, leading many to hope that the fourth-largest cryptocurrency by total market capitalisation may once again be on its way to touching its all-time high value of $3.18, which it reached back in Q2 2018. However, little did anyone know that within a month's time, the currency's fortunes would take a turn for the worst, with the token now trading below the $0.20 mark.
The reason for this sudden downfall has been the SEC's recent lawsuit against Ripple, wherein the regulatory body has alleged that the company's native crypto offering "XRP", since its very inception, has served as a "security" and therefore should have been duly registered with the government body before being released for sale to the American investor community.
As part of its litigation brief, the SEC has stated that Ripple along with its executive brass – naming CEO Brad Garlinghouse and executive chairperson Chris Larsen in particular – have indulged in the wrongful acquisition of $1.38 billion from the sales of the XRP token. To get a better overview of the matter, Finder reached out to Jeffery Liu Xun, CEO of cryptocurrency trading platform XanPool. In his view:
"Since 2013, Garlinghouse had continuously sold his pre-mined XRP tokens, dumping them on the retail market and benefitting handsomely in doing so. Even if he may have followed the law to the letter, he certainly did not abide by the spirit of the law."
However, Nischal Shetty, CEO of India's largest cryptocurrency exchange, WazirX, pointed out to Finder that while the SEC is convinced that XRP can be classified as a security, Japanese financial services company, SBI Holdings, recently released a report claiming that "XRP is a crypto asset and not a security", adding: "This will be a defining battle, one that will have strong implications on the entire crypto ecosystem. The verdict will also set precedent on how other tokens will be viewed by regulators."
XRPs delisting continues across the board
On 25 December, XRP experienced an unexpected surge, with the digital currency rising by a staggering 40% within a span of just 24 hours; however, this short-lived window of relief was followed by news of many exchanges – such as OSL, Beaxy and CrossTower – announcing that they had temporarily stopped trading or had removed XRP from their platforms.
The aforementioned suspensions were followed by news of other, relatively larger cryptocurrency exchanges also taking similar measures against XRP. For example, US-based trading platform Bitstamp announced via Twitter that, starting January 2021, it will prohibit its users from trading XRP. Similarly, on Monday, cryptocurrency exchange and finance platform Crypto.com released a blog post stating that it will delist and suspend trading of the XRP token in the United States immediately.
Other exchanges and trading apps that have also enforced similar suspensions include Coinbase, OKCoin, Bittrex, Wirex and Ziglu. Not only that, even some wallet providers like Swipe have issued statements announcing that they will no longer be providing support for XRP come January.
Bye-bye, XRP, it was good while it lasted
If the SEC is successful in its prosecution efforts, Larsen and Garlinghouse will be faced with a whole host of serious legal implications, as both individuals have been alleged to have participated and profited immensely from XRP's various sales efforts (such as ICOs, fundraisers, etc). As a result, the regulatory body is now seeking an unspecified civil monetary penalty from the executives, details regarding which are not in the public domain as of yet.
Lastly, the commission is also looking to acquire all of Ripple's "ill-gotten gains" and to permanently ban the above-named defendants from ever selling unregistered XRP or participating in the sale of unregistered, nonexempt securities.
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Disclosure: The author may hold the cryptocurrencies discussed in this article at the time of writing.