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In Brief

The Securities and Exchanges Commission (SEC) filed charges on Dec. 23 against Ripple Labs and two top executives. The company, co-founder and ex-CEO Christian Larsen, and current CEO Brad Garlinghouse are charged with raising $1.3 billion in funds through the illegal sale of XRP.

Larsen and Garlinghouse are also charged with engaging in unregistered sales of their own, totaling $600 million. The charges come after one of crypto’s most awaited airdrops.

By Dec. 10, 21 billion XRP was held for the SPARK airdrop. XRP hit $0.60 as the pre-event snapshot approached. Prices dropped afterward, but the SEC announcement sent prices spiraling.

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The Ripple Issue

The SEC asserted that XRP is not a currency. Rather, it’s a security. As such, Ripple, Larsen, and Garlinghouse needed first to register the token with the Commission.

Garlinghouse took the lead in Ripple’s public defense. He took to Twitter to explain the company’s position. He pointed to multiple factors that should materially affect the case. 

First, Ripple has been operating on the market for eight years. Moreover, the government already examined XRP and found it to be a currency. 

Second, Garlinghouse drew attention to the timing of the accusations. The SEC launched the case with less than two months left in the current administration. In essence, the current SEC management only created a mess for the incoming team to deal with. 

Garlinghouse also stressed that only 5% of Ripple’s business was in the United States. As such, the platform would survive the SEC’s measures.

Market Reaction

The market reaction was swift on exchanges. Garlinghouse’s defense might have won him some sympathy, but little price support.

The XRP price dipped below $0.20 at year-end and ranged in the mid-’20s until rising to above $0.30 on Jan. 5. US-based exchanges subsequently began announcing delistings.

However, this is a climate influenced greatly by institutional investors. The move by Grayscale to sell over ⅓ of its XRP holdings, or over 9 million XRP, is headline news.

Moreover, Grayscale is allowed to sell securities. This means that the SEC charges will not affect it. The sale, then, is perhaps seen as a sign of the times.

What’s Next for XRP?

The next couple of months will be busy for Ripple Labs, Larsen, and Garlinghouse. There is damage control as exchanges delist or temporarily halt XRP trading, such as Bitstamp on Jan. 8 and Coinbase on Jan. 19.

In February, court issues become prominent. The parties need to come to terms regarding a pro forma offer by the courts to move the case to a magistrate by Feb. 15. The SEC usually refuses, Ripple Labs will likely refuse as well.

If that occurs, then the first hearing is on Feb. 22. Stay tuned! BeInCrypto will certainly keep you posted regarding the Ripple Labs saga!