Ripple CEO Warns SEC May Sue Company Over XRP Sales

The US Securities and Exchange Commission (SEC) intends to sue Ripple over the sale of XRP, CEO Brad Garlinghouse said on Monday.
Fortune said the lawsuit will be filed in the near future, although an exact date has not yet been disclosed. The lawsuit had not yet been filed at the time of going to press. Ripple co-founders Chris Larsen and Garlinghouse will be named defendants alongside the company, Garlinghouse said.
“It's an attack on the entire crypto industry and American innovation,” Brad Garlinghouse said in a statement emailed.
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In a statement sent by email, outside attorney Michael Kellogg of Kellogg, Hansen, Todd, Figel & Frederick said, “This complaint is legally wrong. Other major branches of the U.S. government, including the Department of Justice and the Treasury Department's FinCen, have already established that XRP is a currency. Transactions in XRP therefore do not fall within the scope of the Federal Securities Act. This isn't the first time the SEC has tried to go beyond its legal authority. The courts have already corrected it and will do it again. "
Ripple received news Monday that the SEC was about to sue, according to the Wall Street Journal.
Ripple is already being sued in a suspected class action lawsuit by XRP investors for alleging the price of XRP will rise. This lawsuit, which began in 2018, continues its judicial process.
The company has previously paid fines of $ 700,000 for charges violating aspects of the Financial Crimes Enforcement Network (FinCEN) bank secrecy law, as well as additional fines of $ 450,000 to the U.S. Attorney's Office for the Northern District of California.
Related: Market Wrap: Bitcoin Falls To $ 21.9,000; Affected ETH 2.0 ethers blocked in DeFi
Garlinghouse's move on Monday is a reminder of how messaging platform Kik announced that the SEC will file lawsuits against it for raising $ 100 million to build Kin. Kik later settled the case.
Crypto company CEOs warning the broader industry of impending regulatory action could be a bigger trend. Brian Armstrong, chief executive of Coinbase, previewed the possible rulemaking by the U.S. Treasury Department last month, weeks before FinCEN released a rule-making proposal.
XRP was developed and introduced in 2012 by Arthur Britto, co-founder of Ripple Labs at Larsen, and David Schwartz, chief tech. Ripple manages 55 billion XRP in escrow and releases 1 billion every month. Any unused XRP will be returned to the Escrow.
According to Messari, Ripple has sold around $ 1.2 billion to XRP over the years.
The price of XRP fell after news of the impending lawsuit broke and fell 12% to below 50 cents over the 24-hour trading period. The price of the cryptocurrency had fallen earlier in the day, joining a wider market decline.
An SEC spokesman did not immediately return a request for comment. After this article was published, a Ripple spokesperson emailed the following statement attributed to Garlinghouse:
The SEC is fundamentally wrong, both legally and factually. XRP is a currency and does not have to be registered as an investment contract. In fact, the Justice Department and the Treasury Department's FinCEN established that XRP was a virtual currency back in 2015, and other G20 regulators did the same. No other country has classified XRP as a security.

The SEC has approved XRP as a currency for over eight years, and we're questioning motivation for filing that lawsuit just days before the change in administration. Instead of creating a clear legal framework for crypto in the US, [SEC Commissioner] Jay Clayton inexplicably decided to sue Ripple - leaving the real legal work to the next government.

This is an attack on the entire crypto industry and American innovation. By only giving bitcoin and ether (whose networks are at the mercy of the Chinese Communist Party) the SEC has selected the winners - without considering an entire industry outside of these two brands. Jay Clayton ignores the advice of national security experts and the US government and hands the future of our global financial systems - based on blockchain and crypto technologies - to an authoritarian regime.

We are right and we will aggressively fight - and win - this battle in court to get clear road rules for the entire industry in the US. We are on the right side of the law, on the right side of politics, and we will be absolutely active on the right side of history. In the meantime, it is business as usual for Ripple and our hundreds of customers, comprised of the world's leading financial institutions, who rely on Ripple to provide quality solutions.
UPDATE (December 22, 2020, 02:25 UTC): Updated with additional context.
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Ripple CEO warns SEC companies could be sued over XRP sales
Ripple CEO warns SEC companies could be sued over XRP sales
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