Ripple is offering its initial response to a lawsuit from the U.S. Securities and Exchange Commission alleging the company has illegally sold XRP as an unregistered security for years.
In a new blog post, CEO Brad Garlinghouse has released a statement from Ripple lawyer and former SEC enforcement Director Andrew Ceresney.
“The SEC is completely wrong on the facts and law and we are confident we will ultimately prevail before a neutral fact-finder. XRP, the third largest virtual currency with billions of dollars in trading every day, is a currency like the SEC has deemed Bitcoin and Ether, and is not an investment contract. This case bears no resemblance to the initial coin offering cases the SEC has previously brought and stretches the Howey standard beyond recognition.”
Garlinghouse says he and Chris Larsen, which are named in the SEC’s complaint, had the option to settle with the SEC but chose not to.
“Chris and I had the option to settle separately. We could do that, and it would all be behind us. NOT happening. That’s how confident Chris and I are that we are right. We will aggressively fight – and prove our case – through this case we will get clear rules of the road for the industry here in the U.S. We are not only on the right side of the law, but we will be on the right side of history.”
Garlinghouse lists three primary reasons why he believes XRP is not a security.
“XRP is not an ‘investment contract.’ XRP holders do not share in the profits of Ripple or receive dividends, nor do they have voting rights or other corporate rights. Purchasers receive nothing from their purchase of XRP except the asset. In fact the vast majority of XRP holders have no connection or relationship with Ripple whatsoever.
Ripple (our company) has shareholders; if you want to invest in Ripple, you do not buy XRP but rather shares in Ripple.
Unlike securities, the market value of XRP has not been correlated with Ripple’s activities. Instead, the price of XRP is correlated to the movement of other virtual currencies.”
According to Garlinghouse, the SEC’s case is an attack on the entire crypto industry.
“Let me be clear: Ripple, Chris and I may be the ones named in the filing, but this is an assault on crypto at large. In this case, XRP is a proxy for every other ‘alt-coin’ in the space.
From there, you have a snowball effect; this isn’t good news for any market maker, exchanges like Coinbase, etc. This sets a terrible industry-wide precedent for any company working with a digital asset.
You can check out the complete response from Ripple here.
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