The US Securities and Exchange Commission (SEC) announced yesterday that it has filed a lawsuit against Ripple Labs and its two executives. XRP crashed more than 25% following the news as one of the leading cryptocurrencies in the world has now lost more than 37% in the last two days.
According to the official announcement by the SEC, the charges are filed against Ripple Labs, Christian Larsen, and the current CEO of Ripple, Brad Garlinghouse. The complaint states that Ripple raised funds through the sale of XRP in an unregistered securities offering to investors in the US and worldwide.
Following the official announcement, XRP crashed more than 25% to $0.35. As of writing, the price is hovering around $0.36, a significant drop from $0.56, the cryptocurrency registered on Monday. XRP has now lost the title of the world’s third-largest cryptocurrency as Tether replaced XRP after the recent crash.
The SEC mentioned in the official filing that Brad Garlinghouse and Christian Larsen are significant security holders as the Commission submitted a lawsuit of around $1.3 billion against Ripple Labs, Christian Larsen and Brad Garlinghouse.
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“Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately $600 million and the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws,” the official filing states.
Ripple CEO warned the crypto community about the potential lawsuit by the SEC earlier and termed the recent regulatory action as an attack on the cryptocurrency market in the US.
“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” Stephanie Avakian, Director of the SEC’s Enforcement Division, said in a statement.