The US SEC formally filed a lawsuit against Ripple and its two executives

The U.S. Securities and Exchange Commission (SEC) announced today that it has filed a lawsuit against Ripple and two of its executives, alleging that they raised more than $1.3 billion through an unregistered, ongoing digital asset securities offering.

According to the SEC's indictment, the two executives are: Ripple co-founder, executive chairman of the board and former CEO Christian Larsen and the company's current CEO Bradley Garlinghouse.

The indictment alleges that Ripple raised funds in an unregistered securities offering by selling a digital asset called XRP to U.S. and global investors beginning in 2013.

Ripple has also distributed billions of XRP in exchange for non-cash considerations such as labor and market-making services.

According to the indictment, in addition to organizing and promoting XRP sales used to finance the company’s operations, Larsen and Garlinghouse conducted unregistered personal sales of XRP totaling approximately $600 million.

The indictment alleges that the defendants failed to register their offers and sales of XRP and failed to obtain any exemption from registration, in violation of the registration provisions of the federal securities laws.

“Issuers seeking the benefits of a public offering (IPO) must comply with the federal securities laws requiring registration of the offering, unless an exemption from registration is available,” said Stephanie Avakian, Director of the SEC’s Division of Enforcement.

“Ripple, Larsen, and Garlinghouse failed to register their ongoing offers and sales of billions of XRP to retail investors, preventing potential buyers from fully understanding XRP and Ripple’s business.”

“These registration requirements are designed to ensure that potential investors, including significant retail investors, have access to important information about an issuer’s business operations and financial condition,” said Marc P. Berger, Deputy Director of the SEC’s Division of Enforcement.

“Here, we allege that Ripple and its executives failed to meet these core investor protections for years, and as a result, investors lacked the information to which they were entitled.”

The SEC’s complaint, filed today in U.S. District Court in Manhattan, charges the defendants with violations of the registration provisions of the Securities Act of 1933 and seeks injunctive relief, disgorgement, prejudgment interest, and civil penalties.

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byAmy Liu

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