The U.S. Securities and Exchange Commission (SEC) intends to sue Ripple over its sale of XRP, CEO Brad Garlinghouse said Monday.
According to , the lawsuit will be filed in the near future, though no specific date has been provided yet. The suit had not been filed as of press time. Ripple cofounder Chris Larsen and Garlinghouse will be named defendants alongside the firm, Garlinghouse said.
In an emailed statement, outside counsel Michael Kellogg, of Kellogg, Hansen, Todd, Figel & Frederick said, “This complaint is wrong as a matter of law. Other major branches of the U.S. government, including the Justice Department and the Treasury Department’s FinCen, have already determined that XRP is a currency. Transactions in XRP thus fall outside the scope of the federal securities laws. This is not the first time the SEC has tried to go beyond its statutory authority. The courts have corrected it before and will do so again.”
Ripple received word Monday that the SEC intended to sue, according to the .
Ripple is already being sued by investors in a putative class-action lawsuit, on claims that the company said XRP’s price would rise. That suit, which began in 2018, continues its course through the .
The company $700,000 in fines on charges it violated aspects of the Bank Secrecy Act brought by the Financial Crimes Enforcement Network (FinCEN), as well as an additional $450,000 in fines to the U.S. Attorney’s Office for the Northern District of California.
Garlinghouse’s move Monday is reminiscent of how messaging platform the SEC would file suit against it for raising $100 million to build Kin. Kik later settled the case.
Crypto company CEOs warning the broader industry of upcoming regulatory actions may be a bigger trend. Coinbase chief Brian Armstrong potential U.S. Treasury Department rulemaking last month, weeks before FinCEN for rulemaking.
XRP was by Larsen’s Ripple Labs co-founder Arthur Britto and tech chief David Schwartz . Ripple maintains 55 billion XRP in escrow, releasing 1 billion every month. Unused XRP is returned to escrow.
According to , Ripple has sold about $1.2 billion in XRP over the years.
XRP’s price fell after news of the impending lawsuit came out, dropping 12% on the 24-hour trading period to below 50 cents. The cryptocurrency’s price had already begun falling earlier in the day, joining a broader market decline.
An SEC spokesperson did not immediately return a request for comment. After the publication of this article, a Ripple spokesperson emailed the following statement, attributed to Garlinghouse:
UPDATE (Dec. 22, 2020, 02:25 UTC): Updated with additional context.