SEC sues Ripple over XRP cryptocurrency

1 min read

Ripple Inc. said it will defend itself against a lawsuit from the Securities and Exchange Commission that claims the company violated investor-protection laws when it sold a bitcoin-like digital asset called XRP.

The suit, which hasn’t yet been filed, would be one of the highest-profile SEC actions against a cryptocurrency pioneer, just as the regulator’s chairman is departing at the end of the Trump administration. The SEC over the past few years has brought and mostly won civil lawsuits alleging startups trampled securities laws when they raised money by selling cryptocurrencies.

None of those companies, though, was as big as Ripple and XRP. Ripple had a $10 billion valuation in its most recent funding round in 2019, and XRP is the third-largest cryptocurrency by market value.

Ripple said it was informed by the commission on Monday that regulators soon plan to sue the company, Chief Executive Brad Garlinghouse and co-founder Chris Larsen in federal civil court. The company and the officers say they plan to fight the claims.

“They’re wrong in matter of law and fact,” Mr. Garlinghouse said.

The lawsuit revolves around whether XRP, a digital asset that the company launched in 2012, is actually a security that should have been registered with the SEC. Registration involves providing the SEC and the public with disclosures about a company’s business model, risks and financial condition. The SEC reviews the disclosures and provides feedback to improve them for investors.