“Ripple claimed that the XRP did not meet the criteria for regulating traditional securities and denied that its original sale of the token did not constitute the SEC’s version of an” offer “.
Ripple issued an official response to the United States Securities and Exchange Commission (SEC) allegations about the illegal sale of XRP.
In court documents filed in the Southern District of New York, the word “denies” appears 440 times while Ripple refutes the SEC’s claim that the company was involved in an illegal securities offering when it first issued the XRP to investors.
“Ripple denies that he is involved in any offer of securities; denies the inaccurate characterization of the legal advice that Ripple received in relation to XRP; and denies that he was involved in a single XRP ‘offer’. “
“Ripple claimed that the XRP did not meet the criteria for regulating traditional securities and denied that its original sale of the token did not constitute the SEC’s version of an” offer “.
“Prior to this case, no securities regulator in the world claimed that XRP transactions should be registered as securities, and for good reason. XRP’s functionality and liquidity are totally incompatible with securities regulation. Requiring XRP registration as a security is undermining its main utility … Treating XRP as a security … would subject thousands of exchanges, market makers and other actors in the giant virtual currency market to long, complex and expensive regulatory requirements who never intended to rule virtual currencies. “
Ripple told the court that the company never tried to raise money on the promise of profits, which is the premise that gives the SEC the authority to oversee the cryptocurrency ecosystem.
“For the sake of economic substance, XRP differs categorically from the various instruments and business agreements that Congress has authorized the SEC to regulate – all of which, unlike Ripple, involve“ schemes devised by those seeking to use money from others in the promise of profits. ”Howey, 328 USA out of 299.
“All other cases where the courts ruled that transactions involving a digital asset were investment contracts involving an ICO of the issuer or another promise of future tokens to raise money to develop a digital asset product, as well as a contractual relationship between the issuer and the buyers asset. Ripple never had an ICO, never offered future tokens to raise money, and has no contracts with the vast majority of XRP holders, ”Ripple told the court.
SEC accuses Ripple of $ 1.3 billion unregistered bond offer
In December 2020, the SEC filed a lawsuit against Ripple Labs Inc. and two of its executives, for raising more than $ 1.3 billion through an offering of unregistered digital asset securities.
The complaint accuses co-founder Christian Larsen and CEO Brad Garlinghouse of raising funds since 2013 in an offering of unregistered bonds to investors in the United States and around the world.
Stephanie Avakian, Director of the SEC’s Enforcement Division, said at the time: “Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution and a secondary trading market, must comply with federal securities laws that require registration of offers, unless a registration exemption applies.
“We claim that Ripple, Larsen and Garlinghouse did not record their ongoing offer and sale of billions of XRP to retail investors, which deprived potential buyers of adequate disclosures about the XRP and Ripple businesses and other important long-standing protections that are fundamental to our robust public market system. “
“Either play the rules or we will finish you”
New York Attorney General Letitia James recently warned industry insiders that the state of New York will not tolerate unregistered cryptocurrency operations. They may face “civil and criminal liability”.
Attorney General Letitia James said: “Greedy industry participants often take unnecessary risks with investor money, but today we are leveling the playing field and issuing alerts to investors and industry members across the country. All investors should exercise extreme caution when investing in virtual currencies. Cryptocurrencies are unstable and high-risk investments that can result in devastating losses just as quickly as they can generate gains ”.
“We will not hesitate to act against anyone who violates the law. Two weeks ago, we filed a lawsuit to close Coinseed’s fraudulent operation. Last week, we ended the illegal activities of Bitfinex and Tether in New York. And now, today, we are sending a clear message to the entire industry that you either follow the rules or we are going to shut you down.
The prosecutor’s office recently banned Bitfinex and Tether from operating in New York. The decision came after a thorough investigation of 2.5 million documents that concluded that Tether falsely represented that each of its stablecoins was fully guaranteed, one by one, by reserve US dollars at all times.
New York AG also banned the Coinseed crypto trading platform from operating in the state after operating as unregistered brokers for more than three years, while raising more than $ 1 million in assets from investors.
“Millions across the country and in the world today use cryptocurrencies as decentralized digital currencies – unlike the real, regulated government currencies, including the US dollar – to buy goods and services, often anonymously, through secure online transactions,” he said. NY AG James at the time.
Ripple: from cryptocurrencies to “real, regulated government currencies”
Ironically, Ripple’s XRP is now being considered by many countries as the basic ledger for their centrally supported digital currencies (CBDCs). Ripple announced that it is testing a private version of the XRP Ledger.
CPA Australia released a report on the CBDC that stated that France’s central bank, Banque de France, openly discussed Ripple / XRP as a possible platform for Europe’s central digital currency.
More than 80% of central banks are actively studying the development of their own digital currencies and Ripple claims that its CBDC ledger is private (for transaction privacy and currency control) and interoperable (to connect with the global financial infrastructure existing currency, as well as other CBDCs and other digital currencies), as well as customizable.