The US Securities and Exchange Commission (SEC) has filed a modified version of the lawsuit against Ripple. The regulator focused on the actions of individual defendants – the CEO of the company Brad Garlinghouse and its co-founder Chris Larsen.
Lawyer Jeremy Hogan called the SEC’s decision to single out individual responsibility in such a case as unusual. In his opinion, the success of Ripple’s lawyers is unlikely in light of the regulator’s statements about the personal involvement of the company’s executives.
The commission said that the company’s management manipulated the price of the token and sold 14.6 billion XRP worth more than $ 1.38 billion.
“Larsen and Garlinghouse played a significant role in discussing and approving Ripple’s institutional sales and other XRP offerings to individual investors,” the SEC said in a lawsuit.
The regulator also required the defendants to provide a notice that contains a warning about the possible recognition of the XRP token as a security.
According to Hogan, such documents are protected by attorney-client privileges, but if the requirements of the SEC are met, they can aggravate the position of the Ripple leadership.
In December 2020, the commission filed a lawsuit against the Californian company, accusing it of selling unregistered securities in the form of tokens worth $ 1.3 billion. Garlinghouse and Larsen were also defendants.
Ripple’s CEO said the company has always worked in partnership with regulators. In his opinion, this lawsuit is a “terrible precedent” for the entire cryptocurrency industry.
In January 2020, Ripple’s lawyers asked the commission for information on why it does not classify Bitcoin and Ethereum as securities.
Amid SEC claims, major platforms have dropped support for the XRP token. These include Coinbase and OKCoin, Galaxy Digital, Bitstamp, B2C2, eToro and Kraken.
Gavin Michael, head of the regulated platform Bakkt, ruled out adding the coin to new products, and Grayscale Investments announced the liquidation of the XRP-based investment trust.
Management company 21Shares has excluded the Ripple token from its exchange traded products. Bitwise Asset Management has removed it from its flagship index fund.
In late January 2021, a Florida resident sued Ripple Labs and Garlinghouse. In the applicant’s view, the defendants violated state securities and enrichment laws.
Tetragon Financial Group also filed a claim against the company, which in 2019 led the $ 200 million Series C funding round.
Representatives of the SEC and Ripple questioned the possibility of pre-trial settlement of the claim. Preliminary hearings in the case are scheduled for February 22.
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