The US Securities and Exchange Commission’s case against Ripple has become the decisive issue in the crypto market. After Ripple Labs reported on the upcoming lawsuit yesterday, the US Securities and Exchange Commission (SEC) has now formally filed a criminal complaint against Ripple Labs and Brad Garlinghouse and Chris Larsen.
The lawsuit filed in the federal district court in Manhattan accuses Ripple and its two co-founders of earning $ 1.3 billion through “an unregistered, ongoing securities offer for digital assets.” The SEC also claims Ripple Labs has used billions of XRP in exchange for non-cash costs such as labor and market-making services.
Larsen and Garlinghouse also allegedly did not register for personal XRP sales of about $ 600 million each, in violation of the registration provisions of federal securities laws.
A stop and waiver order from the SEC could mean that Ripple must sell XRP tokens as securities in the US. As a result, most cryptocurrency exchanges will have to remove XRP from the list, which will have a huge impact on liquidity in the US. If exchanges fail to de-list XRP, they may face sanctions for allowing their retail customers to trade an unregistered securities.
But not only the liquidity, but also the price may drop further. In the last 24 hours, the price of XRP has dropped another 21% and is trading at $ 0.36 as of the time of writing. The exclusion of American investors from the crypto market could mean another decline.
But things can also be troubling for Garlinghouse and Larsen. According to the SEC, since both cannot register XRP sales, they may face the return of their profits and fines.
How Ripple’s American partners will behave is also doubtful. MoneyGram stands out especially in this regard. Ripple’s payments to MoneyGram are described as market-making services, although they are not mentioned by name in the letters of the payment service provider SEC. In this sense, the SEC writes that “participation for ODL is not organic or market oriented”, but “subsidized by Ripple.” A MoneyGram spokesperson said that he has yet to see any “negative impact” on the longstanding business deal with Ripple, and MoneyGram will continue to watch as the situation evolves.
Is There a Light of Hope?
While things are not looking good for Ripple and XRP price right now, a potential SEC victory doesn’t necessarily mean the end of Ripple and On-Demand Liquidity’s business model. In November, Garlinghouse said a security classification would not affect the company’s business, as the majority of RippleNet customers are located outside of the United States.