Things are getting heated for Ripple, as it might face legal battles with SEC for allegedly making $1.3 billion from the unapproved offering. The fintech, popularly known for creating XRP, was accused by the US. Securities authority for violating investors protection laws.
It is quite unfortunate that this accusation is negatively affecting the performance of XRP in the capital market. Launching an unregistered securities offering might make investors vulnerable to specific losses against which they are not protected. XRP investors might be dropping some assets to mitigate possible losses from court orders that could affect Ripple.
How Ripple made $1.3 billion from unapproved offering
The cryptocurrency makers were charged recently for the crimes. SEC pointed out two prominent board members who led the unregistered securities offering. According to the securities commission, the two individuals are Ripple CEO Bradley Garlinghouse, alongside his co-founder, Christian Larsen, who spearheaded the sale of the offering.
The commission has relevant rules to protect investors’ interests, so when there is a possibility that the right could be violated, legal processes must be taken to investigate properly. A director in SEC, Stephanie Avakian, explained that there is an ongoing allegation against Ripple and its top executives through a press release. SEC said they sold billions worth of unapproved securities to unsuspecting investors, depriving them of adequate information about their holdings and protections in the securities market.
The CEO was suspicious of the suit’s timing and admitted that he thought the lawsuit was wrong when looking at the law and facts following the accusations. Garlinghouse asserted that the claim was not appropriate since XRP was a currency and didn’t need to register it as an investment contract.
The idea behind XRP is similar to the reason other currencies were created. XRP was made to be a universal means of payment in 2012 when it was released for sales. Previously, the coin was performing very well against Bitcoin, but unfortunately, the legal battles might because of the currency dropping from its all-time high.
On the other hand, Bitcoin is performing better than it has done in years, generally attributed to the entry of bulk buyers in the industry. XRP impressively has big names endorsing the cryptocurrency. Popular brands like the SBI holding, Spanish Bank, and even Founder’s Funds.
Some facts SEC brought against Ripple
The US securities regulatory authority alleged that the founding members of the third-largest cryptocurrency in the world could finance the current Ripple firm through sales of unregistered securities offering since the inception of the tokens. Garlinghouse explained that the lawsuit is not just a suit against Ripple, but the whole cryptocurrency industry.
The regulatory body has been working relentlessly to reduce initial coin offering fundraising, mainly because many fraudulent activities are associated with ICOs. Based on statistics, not many tokens sold during crowdfunding become successful in the cryptocurrency market. Ripple and SEC’s legal battle is far from over, causing some serious concerns for investors and players in the crypto space.
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