Ultimate XRP Resource (#GotBitcoin)
A new amended complaint against Ripple draws on the SEC’s framework for digital assets to outline how XRP might be a security – likely the first federal case to do so. Ultimate XRP Resource (#GotBitcoin)
The filing also cites California advertising law, in addition to federal securities law, to argue that investors were misled by Ripple’s promotion of XRP.
While the case is a year old and has not yet received class-action status, the new complaint is the first that Ripple must respond to with a substantive answer.
Ripple Has Until Mid-September To File Its Response
Investors in the cryptocurrency XRP have filed a new complaint against Ripple that marshals the Securities and Exchange Commission’s own words to argue that the startup illegally sold unregistered securities.
The amended complaint, filed Aug. 5 in a year-old lawsuit against Ripple, includes several new arguments and may be the first federal case to cite the SEC’s guidance for applying existing law and regulation to crypto tokens.
It also marks the first filing to which Ripple must directly respond by addressing the facts of the case. Four previous complaints were filed in California state court, but the company successfully moved to have these cases consolidated and shifted to federal court. Ripple has until Sept. 19 to file a response.
“That filing will be the first time in the already-long history of this litigation that Ripple will substantively respond to the allegations around XRP,” said Jake Chervinsky, general counsel at crypto lending startup Compound Finance.
The company has been in the legal crosshairs since May 2018, when investor Ryan Coffey filed the first of several lawsuits seeking class-action status against Ripple Labs, subsidiary XRP II, CEO Brad Garlinghouse and other individuals. XRP, which Ripple periodically sells, has “all the traditional hallmarks of a security,” Coffey claimed.
Investors Vladi Zakinov, Avner Greenwald and David Oconer filed similar suits shortly thereafter. The lawsuits were combined and moved to federal court in November.
While the suit has not yet been certified as a class action, law firms Susman Godfrey and Tayler-Copeland Law were appointed as co-lead counsel at the end of June, with investor Bradley Sostack being appointed as lead plaintiff. (Zakinov, Oconer and Greenwald were denied their own motion to be appointed as lead plaintiff.)
The new amended complaint lays out “a strong case against Ripple,” said Chervinsky, noting that Susman Godfrey is “one of the best plaintiff’s law firms in the U.S.” In particular, he highlighted that the complaint claims XRP is a security under both federal and California state law.
“This is important because California uses the ‘risk capital test’ in addition to the [federal] Howey test to determine whether a transaction qualifies as a security,” he explained. “The risk capital test is broader than the Howey test, meaning the plaintiffs could lose their federal securities claims and still win their state securities claims.”
The plaintiffs’ complaint is trying to tie the XRP Ledger, the distributed network underlying XRP (and therefore the cryptocurrency’s price), back to Ripple, said Rebecca Rettig, a partner at the law firm of Fisher Broyles, which is not involved in the case.
Ripple And Susman Godfrey Declined To Comment
Perhaps the most important difference between the new complaint and its predecessors is the citation of the SEC’s framework for analyzing whether a digital asset qualifies as a security.
“The Complaint reads like a love letter to the SEC,” Chervinsky said. “Although the SEC’s Framework is technically only non-binding guidance, the Court will likely give it significant weight in deciding how to apply the Howey test to the facts of this case.”
Rettig agreed, telling CoinDesk that “this is the first time we have seen the SEC’s Framework applied in a case in federal court.” She added:
“Although the framework on its own doesn’t have precedential value – meaning the court is not required to follow it – it will be very interesting to see how the court handles the utility of the framework in moving forward in determining whether XRP is a security.”
The SEC published the guidance in April, providing for the first time a specific roadmap for how it might assess digital assets.
Over the course of 11 pages, the amended complaint details how the plaintiffs believe XRP is a security based on the framework, stating that “XRP purchasers made an investment of money in a common enterprise”; “XRP investors had a reasonable expectation of profits”; and “the success of XRP requires efforts of Ripple and others”.
“Lead Plaintiff and the Class invested fiat and other digital currencies, such as Bitcoin and Ethereum, to purchase XRP. As explained in the SEC Framework, investment of both fiat and digital currency meets the first prong of Howey,” the filing says.
Ripple and its affiliated parties are the common enterprise, the complaint alleges, saying that any profit the potential class might see “are intertwined with the fortunes of Ripple.”
The price of XRP is dependent on Ripple’s efforts, the lawsuit alleges. Investors would have expected the value of their holdings to grow based upon the efforts of the company.
The Complaint Goes On To Say:
“Lead Plaintiff and the Class have entirely passive roles vis-à-vis the success of the XRP Ledger and XRP. Rather, as Defendants’ own marketing makes clear, the success of the XRP Ledger, and the profits the Class reasonably expected to derive from investing in XRP, are dependent on the essential technical, entrepreneurial, and managerial efforts of Defendants and their agents and employees.”
Rettig noted that “each of the [factors in the SEC Framework] are based on underlying federal case law, so the litigants will likely rely upon these underlying cases and not simply the framework [itself].”
Tweets As Evidence
Like past complaints, last week’s filing points to public statements made by Ripple executives such as CEO Brad Garlinghouse and CTO David Schwartz to bolster its argument.
For example, Garlinghouse said in a 2017 CNBC interview that “people are looking at the success Ripple has been having as a company, and I think that’s increased the value of XRP,” according to the complaint.
Elsewhere, the complaint says Garlinghouse “conceded” that Ripple’s own self-interest is tied up “with building and maintaining a healthy XRP market.”
“The Complaint emphasizes Ripple’s own statements to prove that XRP investors had a reasonable expectation of profits flowing from Ripple’s managerial efforts,” Chervinsky noted. “This is similar to how the SEC framed its own Complaint against Kik,” the messaging app company that the SEC alleges violated securities laws when it raised $100 million during a 2017 token sale.
Beyond interviews, the complaint cites tweets that the plaintiffs believe demonstrate that Ripple indicated XRP’s price would rise due to work the company was doing.
Roughly 40 tweets are referenced in the filing, including tweets from the company, executives and other employees discussing exchange listings, Ripple’s XRP reserves and other marketing efforts. The complaint also references a Garlinghouse quote-tweet of a Motley Fool tweet which said companies using Ripple’s tools “could be a big deal for Ripple’s XRP cryptocurrency” as an example.
“I’ve never seen so many citations to Twitter in a complaint before,” Chervinsky said.
(The suit also notes that Digital Currency Group, which holds a stake in Ripple, is also the parent company of CoinDesk, and cites a 2017 article on this website reporting that XRP’s price had risen above $1 for the first time ever as “one of many instances in which Ripple would promote XRP price movements.”
For the record: CoinDesk operates independently from the parent company, working in separate offices and maintaining strict policies on editorial independence and transparency.)
Beyond simply promoting XRP, the complaint hints that Ripple may have gone as far as to mislead the general public about which of its various products were being adopted.
“On April 26, 2017, Ripple tweeted a link to an article on its own site, proclaiming: ‘#Ripple welcomes 10 additional customers to our #blockchain #payments network.’ Neither this tweet nor the article it linked to informed readers that the blockchain payments network did not refer to the XRP Ledger, but rather Ripple’s xCurrent enterprise solution,” the complaint said, adding in the next paragraph:
“Just days later, on May 3, 2017, with the price of XRP continuing to rise, Ripple tweeted: ‘#Ripple adoption is sparking interest in XRP ‘which has had an impressive rally in the last two months’ via @Nasdaq.’”
Securities law aside, the lawsuit also adds new claims that have not appeared in previous filings in the case, Chervinsky noted.
“For the first time, the plaintiffs now claim that Ripple violated California’s false advertising and unfair competition laws by making fraudulent statements about the genesis, circulating supply, and adoption of XRP,” he said.
The fact that this complaint is in federal court may have helped the plaintiffs. Chervinsky explained:
“Interestingly, the plaintiffs probably couldn’t have alleged those claims on behalf of a global ‘class’ — all persons or entities who purchased XRP — if Ripple had left the case in California state court instead of removing it to federal court.”
According to the filing, Sostack and his fellow plaintiffs are looking for Ripple to reimburse them for their losses.
For the lead plaintiff, those losses total $118,100, according to the complaint, but the full size of the losses allegedly incurred by the class has not yet been calculated.
More significantly, the plaintiffs want the court to declare that XRP is a security, which could have an impact on Ripple’s ability to continue selling XRP from its reserves, as well as potentially limit who can acquire the token.
Other prayers for relief include the plaintiffs wanting Ripple to pay for all legal fees and have the court award any other damages that might be warranted.
Ripple now has 45 days from August 5 to answer the complaint, and could file a response (like Kik Interactive did to the SEC) or a motion to dismiss.
SEC Is Bringing ‘Thor’s Hammer’ Against Ripple, Warns Tone Vays
Ripple is coming under fire from a serial Bitcoin (BTC) proponent this week after news emerged a lawsuit against the company has intensified.
Ripple will feel U.S. regulators’ wrath, says Vays
Ripple, which notionally controls the token known as XRP, is currently being taken to court by an investor, Bradley Sostack, who claims the company engaged in selling unregistered securities.
As Cointelegraph reported, the stakes increased this week, after Sostack amended his original claim to include fresh guidance from the United States Securities and Exchange Commission (SEC).
According to reports, the SEC’s latest pronouncements lend weight to Sostack’s argument, and a filing now shows Ripple must respond to the accusations next month.
Commenting on the events meanwhile, Tone Vays, the veteran trader and host of the Bitcoin Law Review podcast, levelled harsh criticism at Ripple.
“The SEC is bringing Thor’s Hammer,” he wrote on Twitter Aug. 14, openly calling XRP a scam token. Vays promised to debate the lawsuit in the next episode of the podcast.
Controversy surrounding both Ripple and XRP has been almost constant in recent years. Conflicting statements about the company’s relationship to the token, along with the notorious behavior of their social media supporters, have earned the third-largest cryptocurrency an unenviable reputation.
In a separate development this week, cryptocurrency exchange Beaxy announced it had stopped trading after a coordinated attack on Ripple saw a huge sell-off on its order book, driving down XRP prices by 40% on the exchange.
XRP/BTC is currently trading at its lowest level since November 2017.
XRP Community Is Threatening A ‘Takeover’ If Ripple Execs Keep Dumping
Anger about the negative market consequences of Ripple selling XRP to its clients is prompting token holders to conceive of ever-more ingenious means to fight back.
In a tweet published on Aug. 26, Twitter user @CryptoBitlord quipped to his 102,000 followers about his latest scheme for a community effort, writing:
“I’m thinking about forking $XRP so we don’t have to deal with the founders dumping. — This will be a community effort. Retweet if you’re in.”
Crypto Bitlord’s anger has spilled over beyond witticisms; 3 weeks ago, he started a change.org petition entitled “Stop Ripple dumping,” which has secured almost 2,500 signatures by press time.
“We Will Stage A Community Takeover”
Earlier today, Crypto Bitlord tweeted to Ripple’s CEO and CTO:
“Brad Garlinghouse, Joel Katz, you now have 60 days to stop dumping XRP or we will stage a community takeover. If it’s a decentralized network like you say, we have the power to do it.”
As previously reported, Ripple’s quarterly reports have consistently revealed the high number of XRP tokens the company is selling to fund its investments in different firms that have the potential to grow the XRP ecosystem and to fund its operations.
The most recent, published late July, revealed a quarter-to-quarter increase of XRP sales of around 48%. Ripple, however, noted at the time that it had decided to temporarily pause programmatic sales and put limits on institutional sales. It also pledged to decrease future token sales substantially.
As XRP’s Value Continues To Sink, This Has Done Little To Calm Investors.
Garlinghouse was today prompted to respond to what he characterized as the FUD (fear, uncertainty and doubt) surrounding the project, attributing it to questionable sources. He added:
“XRP sales are about helping expand XRP’s utility — building RippleNet & supporting other biz building w/XRP ie Dharma & Forte. Reality is we DECREASED our sales by volume Q/Q and since then the inflation rate of XRP circulating supply has been lower than that of BTC and ETH.”
The Security Classification Hangover
In addition to responding to allegations of purported dumping, Garlinghouse also alluded — but refrained to comment in detail on — recent amendments to an ongoing class action suit against Ripple, in which an investor has alleged that the firm sold XRP as an unregistered security in violation of federal law.
The new filing notably cited guidance issued by the United States Securities and Exchange Commission (SEC) to corroborate its claim that XRP counts as a security.
Garlinghouse briefly responded, stating that “SEC guidance isn’t issued by the Commission and isn’t law, rule or regulation,” and noting that the United Kingdom and others have come out clearly against a securities classification for the token.
Ripple Avoids XRP Question As It Moves To Dismiss Securities Lawsuit
Blockchain network Ripple has filed a controversial motion to dismiss a lawsuit accusing it of selling unregistered securities.
Ripple: Securities Ruling Beyond Scope Of The Court
In a court filing uploaded by Fortune on Sept. 20, lawyers representing the company against investor Bradley Sostack dismissed the claims.
Part of an ongoing legal battle, Sostack says Ripple’s sales of XRP in 2013 constituted an unlawful securities offering.
Ripple denies this, but the case has thrown up wider concerns over the legality of Ripple’s operations regarding XRP. As Cointelegraph reported, executives have refused to acknowledge the company’s relationship to the token, despite their huge personal holdings and continuing sell-offs.
“Court Need Not Resolve Whether XRP Is A Security”
Now, fresh suspicions are swirling after the lawyers’ motion to dismiss failed to address the securities aspect of XRP at all.
“Because of the multiple, independent grounds for dismissing this action, the Court need not resolve whether XRP is a security or currency for purposes of this Motion, which assumes Plaintiff’s allegation that XRP is a security,” a section reads.
The substance of the filing attracted attention from crypto-focused lawyer Jake Chervinsky.
“They make twelve separate arguments for dismissal of the plaintiff’s claims. Not a single one squarely addresses whether XRP is an unregistered security,” he summarized on Twitter on Friday.
The latest developments appeared to have little impact on XRP markets — with the token continuing to trade flat over the past 24 hours at just under $0.30.
Blockchain Firm Ripple Fuses xRapid, xVia And xCurrent Into RippleNet
Ripple, the blockchain firm behind crypto asset XRP, fused three of its services into features of its RippleNet offering.
Industry news outlet CryptoNews reported the change in Ripple’s product offering on Oct. 9.
Little More Than The Names Changed
Per the report, a company’s spokesperson explained that now, “instead of buying xCurrent or xVia, customers will connect to RippleNet — on-premises or through the cloud — and instead of buying xRapid, clients will use On-Demand Liquidity.” The Ripple representative also said:
“Other than the names of the product, very few things have changed and will not affect our customers.”
More Than A Software Suite
The company reportedly believes that moving from a suite of services to offer a network to its customers is a natural evolution of its strategy due to the growth of its user base and development of its standard. He concluded:
“RippleNet Is More Than Just A Suite Of Software.”
As Cointelegraph reported yesterday, alluding to the spate of controversies that have beset the project, Ripple CEO, Brad Garlinghouse, argued that Ripple’s “transparency has opened us up to attack.” He said that there is a “bunch of misinformation” out there, but claimed that this is in part because Ripple is “ten or a hundred times more transparent than anyone in the crypto community.”
Ripple Files Last Bid To Dismiss XRP Securities Lawsuit Before Court Meeting
Even if XRP were a security, the investors suing Ripple brought their case far too late for it to proceed, the company said in a new filing.
Further, subsequent arguments made by the plaintiffs contradict their original claims, Ripple said in the Dec. 4 filing with the U.S. District Court for the Northern District of California.
It’s the latest document filed in the back-and-forth since a federal court appointed Bradley Sostack the lead plaintiff in the ongoing case. Sostack filed his initial amended complaint in August 2019. The plaintiffs claim the company sold XRP as an unregistered security to retail investors.
The filing largely reiterated arguments Ripple made in an earlier motion to dismiss the case: that the amended complaint filed in August missed a legal deadline to pursue claims after an event; that the lead plaintiff still hasn’t been able to show that he bought XRP from any of the defendants (or during an initial offering); and that the claims that XRP is a security conflict with the plaintiff’s claims under California’s state consumer protection law.
As such, Ripple once again has sidestepped the most important question the case poses for the digital asset industry: whether XRP, the third largest cryptocurrency by market capitalization, is a security under U.S. law.
“XRP is not a security, but that is irrelevant for purposes of this motion. Even if XRP were a security, Plaintiff’s claims still fail as a matter of law,” the filing said (emphasis from the original document).
The filing is the last before the parties meet in court next month to argue over the motion to dismiss.
Ship Has Sailed?
Despite the plaintiff’s claims that Ripple’s engaged in an ongoing offering of securities, the filing said, Ripple first began selling XRP in 2013, meaning any case brought after the three-year statute of repose should be dismissed.
“The Court’s passing reference to the statute of repose running ‘from the defendant’s last culpable act (the offering of the securities),’ … does not upend the ‘first-offered’ rule,” the filing said, referencing a number of other court cases which supported this argument.
The statute of repose argument was successfully used by defendants in a number of mortgage-backed securities cases several years ago, Rebecca Rettig, a partner at FisherBroyles, previously told CoinDesk.
Ripple reply also took aim at a line in the plaintiff’s response, filed Nov. 4, which said “Ripple issues new XRP from escrow for the first time each month for sale to the public.”
According to the Dec. 4 filing, this argument contradicts the plaintiff’s original amended complaint, which said “all 100 billion XRP were created out of thin air by Ripple in 2013, prior to its distribution to investors.”
(A bullet point in the new filing further claims that the modifications plaintiff alleged changed XRP were actually made to “Rippled,” the software underpinning the XRP ledger.)
The filing also takes aim once again at claims that Ripple sold the XRP to the plaintiff, claiming that there was a “one-in-ten-thousand chance” that this could have occurred.
According to the filing, “Ripple’s alleged exchange sales of XRP accounted for .095 percent—less than one-tenth of one percent—of the total volume of XRP sold on exchanges” during the time period Sostack said he bought XRP.
The parties will meet in court on Jan. 15, 2020.
Messenger Giant Line’s Crypto Exchange To Delist XRP This Month
BitBox, the Singapore-based cryptocurrency exchange operated by internet messaging giant Line, announced that it will delist XRP on Jan. 16.
Cointelegraph Japan reported BitBox’s decision earlier today. The announcement published on the exchange’s website on Jan. 6 read:
“We keep a constant watch on all coins that are being traded on BITBOX. If a coin does not meet our standards based on its performance, reliability, liquidity, or law and regulatory requirements, it will be delisted from our exchange. To protect your assets and interests, we provide sufficient notice before delisting.”
The crypto asset in question will be delisted at midnight on Jan. 16 together with XRP trading pairs with Bitcoin (BTC), Ether (ETH) and Tether (USDT).
BitBox recommended that its users cancel all their trades before the delisting takes place. After XRP is delisted, BitBox’s customers will have until midnight Feb. 16 to withdraw the coin.
Reasons Behind Delisting Unclear
As of press time, BitBox has not answered Cointelegraph’s request for clarification regarding its decision to delist XRP, the third-largest cryptocurrency by market capitalization at $9.4 billion.
Looking at CoinMarketCap’s BitBox volume data, only 0.02% of the exchange’s volume came from XRP trading.
BitBox was launched in June 2018 by Line, the firm behind a major Japanese social messaging app. The firm started facilitating crypto trading globally with the exclusion of the United States and Japan at first, but obtained a crypto exchange operating license from Japan’s financial regulator in September last year and expanded its operations as BitMax.
Brad Garlinghouse, the CEO of the blockchain firm behind XRP, recently answered concerns that the company could control the crypto asset’s price due to the significance of its holdings. He claimed that the firm does not want to “dump” its associated XRP cryptocurrency despite selling huge amounts of it and strongly denied the company could influence the XRP price.
What Impact Would A Ripple IPO Have On XRP Price?
Blockchain payment network Ripple launching an initial public offering (IPO) could, in fact, devalue the cryptocurrency in which it holds a majority stake.
According to several market participants interviewed by Cointelegraph over the weekend, Ripple going public has potential implications for the fate of altcoin XRP.
Ripple IPO: Boom Or Bust For XRP?
The company’s CEO, Brad Garlinghouse, last week hinted an IPO may occur within the next year.
In the face of flagging XRP prices, the impetus behind a major fundraising event is clear for commentators, but whether it would reverse the token’s fortunes is not at all clear.
“Though Ripple is making inroads, it is yet to disrupt the global money transfer system in a major way,” regular Cointelegraph contributor and analyst Rakesh Upadhyay said. “Initially, after the IPO, the market participants might be patient but they will soon seek results. When the results don’t come through, it will hurt prices.”
For Upadhyay, Ripple’s lack of progress despite its various deals with major banks and other businesses means harder times are still to come.
A telltale sign that liquidity remains problematic is Ripple’s mass selloffs of XRP. As Cointelegraph reported, these were bigger in 2019 than ever before. Even the IPO announcement failed to move XRP/USD significantly higher.
“A sharp fall in price will make it difficult for Ripple to raise money. It has been selling tokens, which shows that it is not making enough money to fund its operations. But unlike before, after the IPO, Ripple will also not be able to sell tokens without announcing beforehand. When announced, this will again hurt prices.”
A Different Kind Of Selloff
The idea of an IPO becoming a straightjacket for Ripple was echoed by the head of Cointelegraph Markets Allen Scott.
For him, the IPO would be a litmus test for buyer appetites already under scrutiny after the XRP selloffs.
“Many see Ripple selling XRP regularly as a recurring ‘IPO’ already sans shareholder rights,” he said.
“So this might actually hurt Ripple — it would put into question not only its operational costs and business model of dumping on the market but more importantly, the existence of XRP.”
By contrast, for fellow contributor and ex-eToro analyst Mati Greenspan, an IPO could allow Ripple to strengthen its position vis-a-vis XRP.
“My feeling is that it would be positive. Additional funding for Ripple would mean less reason to sell off tokens,” he summarized.
Perhaps predictably, prominent XRP investors share even less of the sense of foreboding. Michael Arrington, the founder of TechCrunch and hedge fund Arrington XRP Capital, told followers to “disregard FUD” around the IPO.
“It’s healthy, and awesome if/when it happens,” he tweeted on Jan. 24 in the wake of Garlinghouse’s announcement.
Financial Firm SBI Holdings To Offer XRP Cryptocurrency As Shareholders’ Benefit
Japan’s crypto-friendly financial services company SBI Holdings will give shareholders the option to receive the XRP cryptocurrency as a benefit.
SBI announced on Friday shareholders could either take the benefit in XRP or another product offered by health food and cosmetics subsidiary SBI Alapromo.
Under the scheme, new shareholders on the company’s registry as of the starting date of March 31 can accept XRP to the value of 2,000 yen (around $18), while those who’ve been shareholders for over a year will receive 8,000 yen ($73.50) in the cryptocurrency.
The Alapromo alternatives include cosmetics, health supplements and brown rice powder. All shareholders are being given a 50-percent discount on supplements and cosmetics sold by the subsidiary.
There is caveat for those who would take the XRP benefit: they must be resident in Japan and have an account at SBI’s cryptocurrency exchange VC Trade, which launched in 2018 as the first crypto trading platform backed by a bank.
SBI has been one of the most active corporations in crypto and blockchain. As well as the exchange, it has a crypto mining division that recently was reported to be involved in potentially the world’s biggest bitcoin mine under development in Texas.
The firm has also formed a joint venture with Ripple, which is involved in the development of XRP, to offer a cash transfer app called Money Tap. That project has seen participation from a number of Japanese banks.
It has further teamed with blockchain consortium startup R3 to market R3’s Corda platform in Japan and the region. Also announced by SBI on Friday, Japanese bank Sumitomo Mitsui agreed to join that venture with a view to potentially using Corda technology.
Ripple Co-founder Jed McCaleb Sold a Billion XRP and Has 4.7B Left
Analysis by blockchain monitor Whale Alert suggests that Ripple co-founder Jed McCaleb sold off more than one billion XRP between 2014 and 2019.
In a Medium post published on Feb. 6, Whale Alert estimated that McCaleb has another 4.7 billion XRP left to sell, equating to around 5% of the total supply. At today’s prices, the hoard is worth more than one billion U.S. dollars, dwarfing the $135 million Whale Alert estimates he has made via XRP sales to date.
McCaleb sold another 19 million, or $4.13 million worth last month — and Whale Alert believes the rate may increase this year as the agreements limiting his XRP sales expire. Specifically:
“At the current rate it would take him around 20 years to sell all of it, however, his activities have been limited by the settlement agreement with Ripple, which is likely to expire sometime in 2020.”
The news alarmed some XRP holders on Twitter.
“We didn’t want to alarm people, but I hope they now have a better view of what’s going on,” Whale Alert told Cointelegraph.
Whale Alert monitors blockchains and issues notifications on Twitter and Telegram about large movements of cryptocurrency.
90,000 transactions analyzed
Whale Alert posted the addresses it had identified as belonging to McCaleb, which it traced via the information on his blog, forum posts and the public ledger.
“By analyzing over 90,000 transactions we were able to track around 8 billion XRP to Ripple, a settlement account and his personal accounts from which he actively sells.”
It said he sold off the 1.05 billion XRP almost exclusively through Bitstamp.
Whale Alert was unable to determine if McCaleb’s sales had affected the price of XRP but said: “because he is exclusively selling XRP, he is adding to the net amount available.”
MoneyGram Reveals Real-Time Remittance Tech, Based On Visa Not Ripple
Remittances giant MoneyGram announced a new service allowing real-time money sending, but the solutions of its blockchain partner Ripple are not involved.
MoneyGram recently announced FastSend, a new service that allows its customers to send money in real-time to a phone number via a dedicated website or mobile application. Still, the firm’s answers to Cointelegraph’s inquiries revealed that surprisingly MoneyGram’s latest product does not make use of Ripple’s technology.
You Don’t Need Blockchain For Real-Time Settlements
Kamila Chytil, MoneyGram Chief Operating Officer explained to Cointelegraph that FastSend uses Visa’s Direct Original Credit Transaction to deliver funds to bank accounts through Debit card deposit.
While DLT is not involved, the dedicated website and app make use of an open source cloud-based micro services. Chytil also pointed out that while Ripple is not involved in this service, the firm uses blockchain-based extensively in other areas:
“Today, MoneyGram is utilizing Ripple’s On Demand Liquidity product which allows MoneyGram to trade FX at a corporate level using XRP. It’s a back-end treasury function that’s not consumer facing. The technology is helping to solve the most expensive and time consuming aspect of the current process by reducing the amount of money the company needs to park around the world, which will eventually reduce working capital needs.”
Furthermore, Chytil said that MoneyGram is also evaluating other use cases “where blockchain could help solve data privacy and regulatory obligations through distributed ledger technology.” Overall, she spoke highly of DLT and cryptocurrencies, noting that the firm believes blockchain to be the future of global cross-border payments and money transfers.
Chytil also praised the cryptocurrency market for being always active — unlike traditional markets — and the ability of crypto assets to shorten the delivery times of the currency. Lastly, she said that MoneyGram is looking at multiple use cases to maximize the use of Ripple’s tools and is integrating with the latest version of Ripple’s service suite to offer cash-out service to all network members.
Ripple is seeing increasing adoption among financial institutions as a provider of DLT services. This month, Bangladesh-based Bank Asia — which holds over $3.4 billion of assets — has joined Ripple’s RippleNet blockchain-based financial services network.
Ripple’s crypto asset XRP, also recently hit a 7-month high of $0.33 as Cointelegraph reported yesterday. Still, over the last 25 hours to press time the cryptocurrency later lost about 7.82% of its value.
Lawsuit Alleging Ripple’s XRP Is Unregistered Security Moves Forward
A United States federal district court has decided to allow a lawsuit alleging that Ripple’s XRP crypto asset is an unregistered security.
Court documents filed on Feb. 26 reveal that Judge Phyllis Hamilton of the Court of the Northern District of California ruled to only partially grant Ripple’s motion to dismiss the lawsuit against it.
The lawsuit in question was initiated in August 2019 by XRP investor Bradley Sostack, who alleges that the firm misled investors and sold XRP as an unregistered security in violation of federal law.
The lawsuit is looking for the recognition of XRP as a security and the awarding of damages to all investors as well as the cost of the legal actions.
The judge dismissed claims of personal liability against Ripple CEO Brad Garlinghouse and claims of false advertising by the firm. A claim that the company violated California state law was also dismissed.
Still, the court did not grant Ripple’s motion claiming that even if XRP was a security, a lawsuit would have to be dismissed since it was sold over three years ago. The reason this motion was not granted is that Ripple is still selling XRP.
Is XRP’s Future Uncertain?
Ripple’s September motion to dismiss the lawsuit completely failed to address the securities aspect of XRP. Crypto-focused lawyer Jake Chervinsky pointed out at the time:
“They make twelve separate arguments for dismissal of the plaintiff’s claims. Not a single one squarely addresses whether XRP is an unregistered security.”
The consequences of Ripple’s XRP being classified as a security could be catastrophic for the altcoin in question. The motion to dismiss reads:
“Were Plaintiff allowed to belatedly challenge the classification of XRP, it would not only threaten to eliminate XRP’s utility as a currency, but it would upend and threaten to destroy the established XRP market more broadly […] potentially wiping out the value held by the alleged thousands of individual XRP holders around the world.”
XRP Army Exposer Sues Twitter For Account Suspension
Data scientist Geoff Golberg has sued Twitter for banning his account after he used insulting language toward a bot.
Golberg, the co-founder of blockchain analytics company Elementus and an academic at the University of Colorado, was banned from Twitter on July 29, 2019, for engaging in “abusive behavior.”
In the lawsuit, Golberg emphasizes that the very existence of the inauthentic account violated Twitter’s terms of service. He states he was banned for using the words “idiot” and “moron” specifically.
The case was prepared by crypto legal veterans Stephen Palley and Preston Byrne of Anderson Kill. The plaintiff is seeking damages of between $25,000 and $50,000 and the reactivation of his account — which commanded a following of more than 12,000.
Claims Of A Contractual Relationship With Twitter
According to the suit, Golberg is suing Twitter for a breach of their contractual agreement.
The researcher asserts that Twitter accounts are not free, arguing: “User data is the currency that all users provide to Twitter for access, and it becomes a valuable asset that Twitter then sells to platform advertisers.”
Golberg also spent $38,000 to promote various posts on the social media platform over a decade, characterizing his affiliation with Twitter as a business relationship.
While the claim acknowledges that Twitter “enjoys broad discretion to grant, deny, modify, or revoke permission to moderate content on or use its platform at any time,” Golber argues that said discretion cannot be exercised arbitrarily:
“That discretion is not unlimited, and under New York law cannot be exercised arbitrarily and in bad faith any more than a ticket seller could sell a baseball fan a ticket to a baseball game, keep the fan’s money, and then deny the fan entry to the ball park simply because the fan happens to root for the visiting team.”
Golberg Exposes Bot Networks On Twitter
Golberg has spent many years analyzing and exposing inauthentic and bot accounts on Twitter. Through his research, he has exposed networks of fake accounts promoting the XRP token, accounts associated with an Iranian political organization, and the Billboard Music Awards, among others.
In the lawsuit, Golberg states he was “frequently mass reported by nefarious actors seeking to silence his voice,” and received several death threats sent over the platform.
A malicious actor has also leaked confidential information relating to his identity on Twitter — known as “doxxing.” Golberg asserts the account that doxed him remains active on Twitter to this day.
Ripple CTO Sees YouTube Channel Suspended Amid Lawsuit
Ripple’s CTO recently saw his YouTube channel suspended as antics persist on the platform.
Ripple CTO, David Schwartz, reported that his YouTube channel was suspended on April 29. This news comes several days after his company filed a lawsuit against the social media platform, although the two events may not be related.
“Weirdly, YouTube just decided to suspend my channel (SJoelKatz) for impersonation,” Schwartz said in a Tweet. “I wonder who they think I was impersonating.”
The Suspension Comes After Ripple’s Lawsuit Against Youtube
The CTO’s YouTube suspension occurred roughly eight days after his company, Ripple Labs, and company CEO, Brad Garlinghouse, filed a legal claim against the social video platform.
The lawsuit stated that YouTube did not remove impersonators and nefarious parties advertising false giveaways of XRP, the crypto asset associated with the company.
Such scams have plagued the crypto industry for years, in one form or another. The scams often include urging the public to send some amount of cryptocurrency, with the promise of receiving a larger amount in return.
Schwartz’s Suspension Comes During Youtube’s Crypto Channel Banning Spree
Over the past several months, YouTube has banned a number of high-profile crypto YouTubers and videos, seemingly in waves. The platform subsequently restored many of the channels, sometimes after only one day of downtime. The problem, however, still reportedly persists.
It is unclear whether the ban has anything to do with Ripple’s recent lawsuit. Cointelegraph reached out to Schwartz and YouTube for comment, but received no response as of press time.
In light of the recent bans, Cointelegraph recently reported on a number of decentralized social video platform alternatives.
MoneyGram Reports ‘Quiet Quarter’ For Ripple Partnership
Major cross-border payments company MoneyGram has reported a “quiet quarter” with regards to its partnership with Ripple.
During an earnings call for Q1 2020, MoneyGram chairman and chief executive, Alexander Holmes, revealed that it was a “quiet quarter” regarding the firm’s partnership with blockchain payments company Ripple (XRP).
Ripple first announced its “strategic partnership” with the Nasdaq-listed money transfer company during June 2019. The partnership’s initial term was set at two years, with Ripple providing a capital commitment of up to $50 million over 24 months in exchange equity.
The announcement was also slated to see Ripple act as MoneyGram’s “key partner for cross-border payment and foreign exchange settlement using digital assets.”
Ripple Partnership ‘Quiet’ During Q1 For MoneyGram
Despite Ripple drumming up high expectations for the partnership, MoneyGram’s CEO stated that Q1 2020 was “quiet” in terms of Ripple’s services.
“I would say it was a little bit of a relatively quiet quarter, in the sense of really pushing anything particularly new into the market or expanding the service.”
“We did a lot of that in the back half of last year, and really got going on a number of new corridors for that service,” Holmes noted.
MoneyGram To Use Ripple In New Markets And Services
Despite expressing happiness with the deal thus far, Holmes’ comments indicate that Ripple is still yet to solidify its services or target market:
“We continue to flex with them as they continue to expand the service and move some things around, and really figure out what they want, the product to look and feel like, and how they want to take that to various markets. So I think it’ll change over time. I think the results of what we’re doing will vary by quarter and by month.”
“But, yes, it’s been a good partnership, and definitely pleased with what we’ve been doing,” he added.
Ripple Used For Testing New Services And Markets
Looking forward, Holmes expects that the partnership will generate revenues from experiments into “new services and new corridors.“
Holmes’ comments come shortly after Robert Lisv, the CEO of major U.S.-Latin American remittance provider and Ripple partner, Intermex, revealed that the firms’ partnership will not see Ripple’s technology utilized in its core markets.
“So, you won’t really see us leveraging Ripple in our core markets. I think it will bring us more growth in newer markets in places where we’re exploring going into ancillary products,” he stated during Intermex’s March earnings call.
Lisv’s remarks directly contradicted Ripple’s Feb. 5 press release announcing the partnership, which claimed that the deal would “enabl[e] faster cross-border payments between the U.S. and Mexico.”
Ripple Hit With Another Lawsuit Alleging XRP Security Laws Violations
Bitcoin Manipulation Abatement LLC accuses Ripple and CEO Brad Garlinghouse of violating security laws while selling and marketing XRP.
Attorneys for a company called Bitcoin Manipulation Abatement LLC have filed a lawsuit in a U.S. federal district court alleging Ripple misled investors and sold XRP as an unregistered security in violation of federal law.
According to court documents filed May 1, the mysterious entity with little online presence accused Ripple and its Chief Executive Officer (CEO) Brad Garlinghouse of raising more than a billion dollars through the sale and marketing of XRP as an unregistered security.
“…in order to drive demand for and thereby increase profits from the sale of XRP, Defendants have made a litany of false and misleading statements regarding XRP in violation of California’s securities laws, and false advertising and unfair competition laws.”
Bitcoin Manipulation Abatement LLC seeks to “recover damages” and “obtain other relief” related to the alleged violations.
The same firm also filed a $150 million lawsuit against crypto derivatives exchange FTX in November 2019 which was subsequently dismissed one month later. High profile members of the crypto community like Binance CEO Changpeng Zhao expressed his thoughts on the lawsuit claims, calling them “very far fetched”.
Ripple Facing Long-Running Lawsuit
The firm has faced its fair share of legal action, whether short lived or not, over its XRP token, currently the third most valuable by market cap. A class-action lawsuit brought in May 2018 — and currently moving forward — by attorneys for XRP investor Bradley Sostack has similar allegations of deceiving investors and violating securities laws.
While Sostack does seek damages and compensation for legal costs, one of his stated goals was the recognition of XRP as a security. However, an amendment filed on March 25 suggested he was hedging his bets on the possibility the court may not acknowledge it as such. The U.S. Securities and Exchange Commision (SEC) has not yet taken a position on the matter.
Ripple’s XRP Ushers In Wallet Termination Capability
The XRP ledger network now has the ability to delete wallets, thanks to a community vote.
XRP users can now delete their wallets on the XRP network if they so desire — an update put in place after the community majority voted in favor of the change.
“After maintaining an 80% consensus during the mandatory 15-day voting period, the XRPL Deletable Accounts Amendment became enabled on May 8, 2020 at 4:29:30 UTC, through the ledger 55,313,921,” former XRP Center manager, Arturo Portilla, said in a May 8 tweet.
Users Can Delete Accounts On The Ledger
Ripple’s XRP runs on a distributed ledger. “An account in the XRP Ledger represents a holder of XRP and a sender of transactions,” XRPL.org notes.
The XRPL blog announced the upcoming feature in a post on May 6. “Only the owner of an account can delete it, though, since you have to send a transaction from the account to be deleted,” the post explained.
Terminating a wallet means that the account no longer exists on XRP’s present ledger, although the ledger’s unchangeable history will still show the wallet’s past activity, the post said. Sending 20 XRP or more to an old wallet, however, revives the dead account. Anyone can do this, but the wallet’s private keys are still necessary to manage the wallet.
The Update Is Live
The update is now in play, yielding the first account termination, as evident in Portilla’s tweets. Deleting an account also allows owners to gain back XRP stuck in old accounts as each wallet requires a minimum balance of 20 XRP, the XRP post detailed.
“For the first time in history, an XRPL account has been deleted,” he said tweet. Portilla added, “20 reserved XRP were released, 15 XRP were recovered and 5 XRP were burned as the transaction fee (as expected).”
XRP users now have two wallet options, “deletable accounts” and “non-deletable accounts,” as of the update, Portilla said. He also specified that accounts engulfed in certain functions, such as escrows for example, fall under the non-deletable wallet category.
The update from XRP also included other details, such as XRP Ledger number alterations.
Although Ripple and XRP continue waging forward, the coin is not yet out of the woods in terms of securities law violations. Ripple faced another lawsuit this week, alleging that XRP is an unregistered security.
US Consumer Protection Agency Recognizes XRP’s Potential In Remittance
A U.S. consumer protection agency shout outs Ripple and XRP cross-border settlements in a recent regulatory update.
The U.S. Consumer Financial Protection Bureau (CFPB) has recognized the role of Ripple and XRP in cross-border transfers, a recent rule on remittance transfers shows.
According to the May 11 paper, the CFPB — a bureau tasked with protecting U.S. consumers in the financial sector — has been researching new trends on the remittance market. Among one of those developments is “the continued growth and expanding partnerships” of digital asset companies like Ripple, the agency noted.
The CFPB also highlighted that XRP can be used to effect settlement of cross-border money transfers, adding that the company’s suite of products could “allow banks and credit unions to know the exact final amount that recipients of remittance transfers will receive before they are sent.”
SWIFT’s Interpolable GPI Platform Was Also Mentioned
SWIFT’s global payments innovation (GPI) platform, which aims to accelerate remittance using existing infrastructure favored by hundreds of banks worldwide, was also mentioned in the report. SWIFT was considering putting its GPI solution on blockchain rails last year, but there’s been no update on that since.
Ripple Continues To Push For Adoption
Despite tipping its hat to Ripple, the U.S. bureau seems bearish about XRP seeing widespread adoption in the near future. The agency concluded that it is unlikely that reliance on the correspondent banking network will be eliminated “in the short-to-medium term” by any of the newer solutions, based on its estimations and feedback from market players.
Nonetheless, Ripple continues to aim for the financial mainstream. Last month, the crypto company’s partner and investor, Japanese financial juggernaut SBI Holdings, announced plans to integrate Ripple-powered settlements across ATMs in Japan.
According to data published by market research firm Fundstrat earlier in May, XRP has ranked among the weakest performing crypto assets in 2020.
Tether Unseats XRP As Third-Largest Crypto, Dwarfing Its Volume 25:1
The race for third place is still far from over.
Tether (USDT) has overtaken XRP to become the third largest cryptocurrency by market capitalization, as Ripple fails to gain adoption amongst retail investors.
As for Ripple (XRP), it’s been a race to the bottom, its market cap has collapsed from a high around $130 billion in January 2018 to the current one under $9 billion. At one point XRP was jockeying for the number two position with Ether (ETH), however, currently, the combined market cap of XRP and USDT is still $5 billion behind Ether.
USDT Trading Volume Dwarfs XRP’s
Perhaps part of the problem for XRP is a lack of traction with retail investors. In terms of daily trading volume, USDT dwarfs XRP. USDT’s average daily volume in May has outpaced XRP’s by a factor of 25.
But this doesn’t mean that the race for third place is over. With a decent bull run, XRP could blow past its stablecoin rival, which cannot move up or down by more than a few percentage points.
Ripple Likely Sold XRP In An Unregistered Securities Offering
The former CFTC chair’s analysis stating that Ripple’s XRP is not a security might be wrong.
In recent months, a number of class-action lawsuits have been filed against Ripple for selling its XRP token in an unregistered securities offering. So far, the United States Securities and Exchange Commission has not published any official statement on this, which has kept everyone guessing.
To help put an end to the uncertainty, Chris Giancarlo, former chairman of the Commodity Futures Trading Commission, published a paper last week arguing that Ripple’s XRP is not a security. Giancarlo is famous for helping establish the CFTC’s stance that Bitcoin (BTC) and Ether (ETH) are not securities. So, it would seem that he is the right person to be making this case.
The only trouble is that Giancarlo is no longer working for the CFTC — he is now in private practice. Not only that, but he is also currently working for a law firm that is on Ripple’s payroll. Given the clear conflict of interest here, before reading the paper I prepared myself to expect some bias.
However, I never could have imagined how bad it would be.
I know this kills the suspense, but there’s no way to mince words here: The case made in Giancarlo’s paper for Ripple’s sale of XRP to not be considered a securities offering is nonsensical and absurd, so much so that it boggles my mind that Giancarlo was willing to publicly put his name on it.
Read on in today’s article as I go through Giancarlo’s analysis of whether or not the sale of XRP is a securities offering along with a real analysis of whether or not it is.
How To Know If A Token Offering Is A Securities Offering
The Howey Test is the SEC’s principal method of determining whether or not an investment is a securities offering. If it is, the issuer must either register the offering with the SEC or ensure that the offering fits within a recognized registration exemption.
As A Quick Refresher, The Howey Test Comprises Four Prongs That Were Established In A 1946 Supreme Court Case. The Ruling Was That An Investment Contract Exists Where There Is:
“A contract, transaction, or scheme whereby a person invests his money [prong one] in a common enterprise [prong two] and is led to expect profits [prong three] solely from the efforts of the promoter or a third party [prong four].”
In order for the sale of XRP to be considered a securities offering, it must meet every one of these prongs. If the offering fails even one of them, then it is not considered a securities offering.
Read on to see the case for how XRP stacks up against the Howey Test.
Investment Of Money
The first prong of the Howey Test is pretty straightforward: Was there an investment of money in the transaction?
In his analysis, Giancarlo claims that XRP doesn’t meet this prong of the Howey Test because “the common understanding of the term ’investment’ is the transfer of something of value in exchange for a future return rather than a present one.”
At first glance, this sounds reasonable. However, the idea of “investment” as an expectation of future return is handled by the Howey Test’s “expectation of profit” prong. There is no reason to confuse it here with the “investment of money” prong.
Essentially, Giancarlo is presenting a circular argument to avoid admitting the obvious: There is no way to say that there was not an investment of money here. People clearly paid money in exchange for XRP tokens. There’s no other way to see this. I think nearly all courts analyzing this would agree that there was an investment of money.
Remember, just because the XRP offering passes this prong of the Howey Test does not mean that Ripple held an unregistered securities offering. The offering still must pass all of the other prongs of the Howey Test. So, Giancarlo did not have to go to such creative lengths to try to argue against this prong. Of all the prongs that could be met, none are stronger than this one.
Yes — there was without a doubt an investment of money when people purchased XRP. Ripple owned XRP and sold it for U.S. dollars. End of story.
The next prong of the Howey Test primarily refers to whether or not the returns are shared by those that have invested based on the efforts of a common enterprise.
This prong is likely met as well because all holders of XRP share in the gains and losses when the value of their tokens goes up and down based on the managerial efforts of Ripple.
In Giancarlo’s paper, he asserts that there is no common enterprise in this case because “a holder of XRP is not entitled to share in the profits and losses of Ripple.”
This is a terrible argument. There are countless investments that are classified as securities that don’t allow you to share in the profits or losses of the company.
Take a bond, for example. You do not share in the profits or losses of the company or government that issued it, yet a bond is undoubtedly a security.
Next, Giancarlo compares Ripple to Bitcoin to help support his argument. He claims that holders of XRP are no different than holders of BTC, and if BTC isn’t a security, then neither is XRP.
Sadly, there is a big, gaping flaw in this argument: Bitcoin’s development is truly decentralized, whereas XRP is dominated by Ripple. So, the holders of XRP are obviously in a common enterprise, as their fate is pooled equally and depends almost entirely on the development efforts of Ripple.
The XRP network requires constant work, and much of the token’s use depends on its future development. So, to argue that there’s no common enterprise is plainly denying reality.
Giancarlo argues against this reality by claiming that the XRP ledger would function without Ripple’s involvement. And while it is true that if Ripple were to shut down today, XRP would continue to exist, it’s also true that XRP’s price would plummet and use of the platform would disintegrate.
Yes — XRP holders have invested in a common enterprise. All funds are pooled by Ripple to build out the system, and users all benefit or lose from the corresponding fluctuations in the token’s price.
Expectation of Profits
In his paper, Giancarlo argues that there was no expectation of profits because Ripple never officially promised any sort of profit or return to investors and has instead stressed that the main purpose of XRP is for liquidity.
This was a wise move for Ripple, as any marketing of potential earnings, or price increases in XRP, would have automatically gotten its sales of XRP flagged by the SEC. But just because Ripple doesn’t promise future profits in its marketing does not mean that people don’t purchase XRP with the expectation of profit.
Anyone who has been following crypto at all over the past few years knows that people buy XRP with the hopes that its price will go up.
XRP was one of the most successful tokens at one point. To argue that there is no expectation of profit is absurd, not to mention futile. Both Kik and Telegram tried to make this argument with the SEC and were shot down.
Then Giancarlo goes on and makes a ridiculous comparison between XRP and Bitcoin, arguing that because Bitcoin is not a security, XRP fails to meet this prong.
But again, this comparison is grossly flawed. Bitcoin is not a security because it fails to meet all the prongs of the Howey Test. So, even though people do buy BTC with an expectation of profits, it is not a security because the other prongs of the Howey Test are not met.
Although Giancarlo does his best, his arguments in this prong are circular and nonsensical.
Yes — users bought XRP with the hopes that its price would go up.
From The Efforts Of Others
The final prong refers to whether or not profits come from a person’s individual efforts or wholly the efforts of the third party they’ve invested in. Though Giancarlo does not take the time to thoroughly explain his case on this prong, he asserts that profits from holding XRP are not derived wholly from the efforts of the Ripple team.
His argument is that “the XRP architecture is fully autonomous and exists entirely independently of Ripple.” To support this, he points to the fact that most of Ripple’s XRP is held in escrow and that the amount that is released is controlled by Ripple’s program. Control over the supply of the token is just one minor way of influencing the token’s price.
Just have a look at the Ripple website and you’ll see the comprehensive team behind Ripple that is pushing forward the token’s development and its adoption with institutional investors.
As mentioned above, it is possible that the XRP ledger could continue to function without the Ripple team. But that would undoubtedly bring down the price of the token dramatically. As such, it is clear that XRP’s growth and the corresponding profits for token holders depend heavily on the efforts of the Ripple team.
Yes — purchasers of XRP are simply passive investors that are counting on the work of the Ripple core team to come up with new products, promote adoption and boost the value of the token overall.
The Sale Of XRP Is Clearly A Securities Offering
In my opinion, XRP clearly meets all of the prongs of the Howey Test and would be considered a security. Through his paper, Giancarlo relies heavily on the assumption that Bitcoin and Ether failed every prong of the Howey Test, which simply isn’t true.
His entire argument was amateurish and intentionally misleading. Very distinct prongs were lumped together and supported with nonsensical legalese to confuse and distract.
Ripple Teams Up With Santander On International Payments
Massive retail bank Santander has teamed up with crypto and blockchain company Ripple.
Mainstream banking giant Santander has teamed up with blockchain and crypto payments outfit Ripple after customer requests for improved speed.
“Customers told us that the international payments process could be better so we partnered with Ripple to explore how blockchain could make transactions faster, cheaper and more transparent,” Ed Metzger, CTO of One Pay FX said in a statement posted by Ripple on July 9.
A forward-thinking entity, Santander constructed One Pay FX as a borderless blockchain-based payment channel, in the form of an app. The statement noted Santander built the app alongside Ripple.
Metzger described feedback from app customers noting difficulties with transaction exchange rate clarity and timing confusion.
“Ripple helps us directly address the issues raised by our customers […] Whether they are putting down a deposit on a holiday rental or paying a foreign supplier, they see exactly how much will arrive when they’re making the payment and have certainty about when it will get there.”
Why Santander Doesn’t Want To Use Ripple For International Payments Yet
There may be trouble in paradise with one of Ripple’s major partners.
Santander, the large scale Spanish bank and one of Ripple’s major partners, is still hesitant to adopt XRP as part of its international payment network, One Pay FX. The company reasoned that the token “was not actively traded in enough markets” to support the company’s banking needs.
During an interview with the Financial Times, Cedric Menager, chief executive officer of One Pay FX, explained that Santander wants to provide the “best [user experience] as quickly as possible.” He also said that the bank hopes to “operate in as many currencies and corridors as possible from the beginning.”
Ripple clarified that Santander is still using some of the company’s software for its cross-border payment solution, and noted that they consider the Spanish bank to be “one of our largest and most important customers”.
In February, Ripple’s CEO Brad Garlinghouse hinted that banks would soon be less wary of working with digital assets. He stated that once regulators – referring to U.S. watch dogs – understand “you’re not circumventing regulatory frameworks, they get very comfortable very quickly.”
Garlinghouse also claimed that Ripple was used for $54 million in cash flows to Mexico in January. This figure represents 7.5% of the total flow of U.S. dollars to Mexican pesos.
Cointelegraph recently reported that Sygnum Bank, the first crypto bank licensed by FINMA, will allow its users to invest in Ripple’s XRP token via their e-banking portal.
‘Crushing’ Regulations Could Drive Ripple Out Of US
Ripple co-founder Chris Larsen said the firm is considering moving to the U.K., Switzerland, Singapore, or Japan.
Ripple is considering relocating to Europe or Asia amid growing frustration at the lack of regulatory clarity in the United States.
Speaking to Fortune Magazine’s Jeff John Roberts at the Oct. 6 LA Blockchain Summit, Ripple co-founder Chris Larsen said the United States was “woefully behind” in preparing for the cryptocurrency-based next generation of a global financial system. Coupled with U.S. authorities’ policy on “regulation through enforcement” and Ripple may consider leaving the country behind entirely.
“The message is blockchain and digital currencies are not welcome in the U.S.,” Larsen said. “You want to be in this business, you probably should be going somewhere else. To be honest with you, we’re even looking at relocating our headquarters to a much more friendly jurisdiction.”
Larsen stated the firm was considering moving to countries like the U.K., Switzerland, Singapore, or Japan, because in the U.S., “all things blockchain and digital currency start and end” with regulatory bodies like the Securities and Exchange Commission (SEC).
“I don’t think that the posture at the SEC today can possibly get worse for [the crypto and blockchain] industry. It’s just ‘crush it and push it away.’”
Ripple CEO Brad Garlinghouse explained further in a Tweet. “Responsible players like Ripple aren’t looking to avoid rules, we just want to operate in a jurisdiction where the rules are clear,” he said.
Ripple faces a number of class-action lawsuits alleging the firm sold its XRP token in an unregistered securities offering. The SEC has not released any official statement on the matter following its 2019 publication on a regulatory framework for digital assets.
As a result, the crypto firm continues to be called to court partly over an apparent lack of regulatory clarity from the government agency. A federal judge recently denied a motion by Ripple to dismiss a lawsuit filed by investor Vladi Zakinov in 2018 alleging the XRP token is a security under California law.
Ripple Eyes Japan, Singapore If Blockchain Firm Leaves U.S.
Ripple Labs Inc. has shortlisted Japan and Singapore as countries the blockchain payment services company could move to if it leaves the U.S. due to a lack of regulatory clarity, its top executive said.
Switzerland, the U.K. and the United Arab Emirates are also potential destinations, Chief Executive Officer Brad Garlinghouse said in an interview. “The common denominator between all of them is that their governments have created a clarity about how they would regulate different digital assets, different cryptocurrencies,” he said.
Speaking in a separate interview with Bloomberg Television, Garlinghouse said U.S. authorities are unclear on the status of cryptocurrencies, with different opinions over whether they are a commodity, a currency, a property or a security.
“Regulation shouldn’t be a guessing game,” he said. “Ripple is definitely a proud U.S. company and we’d like to stay in the U.S. if that was possible, but we also need regulatory clarity in order for us to invest and grow the business.”
Japan has been a “contrast” to the U.S., creating an “environment for a very healthy market to develop,” he said. The country introduced a registration system for cryptocurrency exchange operators in 2017 — a move widely seen as an official acknowledgment of digital coins as a financial asset.
Garlinghouse highlighted Ripple’s ties with Japanese financial conglomerate SBI Holdings Inc., including their Tokyo-based joint venture offering global payment services driven by blockchain technology. SBI CEO Yoshitaka Kitao, known for his push to create a hub for international financial business in western Japan, joined Ripple’s board last year.
“Japan is one of our fastest-growing markets, in part because we have key partners like SBI,” Garlinghouse said. “I have spoken to the SBI team about the fact we are looking at” the country as a potential destination, he said.
Garlinghouse said the coronavirus pandemic has given a “tailwind” to cryptocurrency markets because central banks have been printing fiat currency, which is “inflationary on some level.” A move away from cash is also helping, he said.
San Francisco-based Ripple offers payments and settlement services through the virtual currency known as XRP and other platforms.
Cryptocurrencies rallied Wednesday after PayPal Holdings Inc. said it will allow customers to use them to shop on its worldwide network. The initial selection includes Bitcoin, Ethereum, Bitcoin Cash and Litecoin, according to a statement.
Japan Is The ‘Leading Candidate’ For Ripple’s New Headquarters: SBI Holdings CEO
Japan is firming up at the most likely new headquarters for Ripple if it leaves its San Francisco offices.
Japanese financial giant SBI Holdings CEO Yoshitaka Kitao said that Japan is the most likely country Ripple will relocate to, should it leave the United States.
At an Oct. 28 press briefing, Kitao stated that the blockchain-based payments firm “has made Japan the most promising candidate” for its new headquarters if Ripple makes good on its threats to move its San Francisco offices. SBI Holdings is a Ripple investor, while Kitao sits on the firm’s board of directors.
Both Ripple co-founder Chris Larsen and CEO Brad Garlinghouse have expressed frustration at the lack of regulatory clarity in the United States. Earlier this month, Larsen stated the firm was considering moving to countries like the U.K., Switzerland, Singapore, or Japan, because authorities in the U.S. had a “regulation through enforcement” policy and were “woefully behind” in preparing for the cryptocurrency-based next generation of a global financial system.
According to a Bloomberg report on Oct. 22, Ripple shortlisted Japan and Singapore. Garlinghouse said at the time that he had spoken to SBI about using the country as a potential location for its headquarters.
“Japan is one of our fastest-growing markets, in part because we have key partners like SBI,” stated Garlinghouse.
SBI Holdings also announced today that Ripple had completed an investment in Japanese payments company MoneyTap, seemingly as part of its plans to integrate Ripple-powered settlements across ATMs in Japan. The integration is reportedly intended to provide consumers with easier access to funds at Japanese ATMs regardless of their banking affiliation.
Ripple CTO Tries To Offer Answers For Lack Of Adoption
Community expectations have long been that banks would adopt XRP, but the reality has been disappointing.
Amid a difficult year for the payments-focused cryptocurrency, Ripple’s CTO David Schwartz has recently taken to Twitter to discuss with community members why banks have been reluctant to adopt XRP as a bridge.
During an exchange with a member of the Ripple community last week, Schwartz explained that there are a set of obstacles Ripple is facing that has led to banks’ reluctance to use XRP to settle cross-border transactions.
Schwartz wrote that he sees issues such as, “Regulatory uncertainty, last mile problems, fear of reprisals from existing partners,” as preventing widespread adoption.
Schwartz also stated that another reason for the banks’ reluctance to adopt XRP on a large scale is that the product is very new and it will take more time to gain the appropriate momentum.
The comments come amid a rough patch for the currency and its holders. XRP is down 18.6% on the year, and down over 90% from all-time highs.
Additionally, Paypal did not include XRP in its list of cryptocurrencies it would offer, and the company is facing an intellectual property lawsuit in Australia over its “PayID” branded payment standard.
Ripple investors are not the only ones feeling the pain, however: earlier this month Cointelegraph also reported that in 2012 Schwartz sold 40,000 Ether at $1 each.
Ripple Opens Dubai HQ As Blockchain Firm Mulls Leaving US
Blockchain payments firm Ripple has set up a regional base in Dubai.
* As reported by the Emirate News Agency on Saturday, the company’s new Middle East and North Africa (MENA) headquarters will be within the Dubai International Financial Centre (DIFC), which announced the news.
* The DIFC is a financial hub with over 2,400 companies and its own “independent judicial system and regulatory framework,” according to its website.
* “Ripple already has a significant client base in the MENA region and the opportunity to co-locate with our customers made DIFC a natural choice,” said Navin Gupta, managing director for South Asia and MENA at Ripple.
* “Our regional office will serve as a springboard to introduce our blockchain based solutions and deepen our ties with even more financial institutions in the region,” he added.
* Dubai is the largest city in the United Arab Emirates (UAE) and one of the seven emirates that form its Federal Supreme Council.
* The announcement comes as Ripple is considering a move away from its home base in San Francisco in the U.S.
* The company’s CEO, Brad Garlinghouse, recently said an unfavorable regulatory regime for the XRP (XRP, +1.92%) cryptocurrency in the states means nations such as the UK, Switzerland, Singapore, Japan and the United Arab Emirates were all being eyed as potential alternative bases.
* As yet, however, there is no indication from Ripple that such a move is going ahead.
* Ripple is closely tied to XRP, helping with its development and using the cryptocurrency in some of its products including cross-border payments and, more recently, loans.
XRP Shot Up 20% Today… On Old News?
XRP has almost doubled its value over the past week.
Ripple’s XRP is rising in price, but the reasons are not entirely clear. Between 11:00 am and 3:00 pm UTC today, XRP gained approximately 20% in value, based on data from TradingView.com. The asset has rallied about 83% total since Friday and is up roughly 98% since Wednesday.
XRP’s price rally seemingly lacks any specific news-related catalyst. Information has surfaced regarding the inclusion of Bank of America to Ripple’s payment network, RippleNet, based on a Monday brief from media outlet Ripple News.
However, looking at the Wayback Machine — a platform that allows users to browse historical snapshots of websites — it would appear that BoA has been a member since at least March 2019.
As far as other reasons for the price pump, the action could simply be the result of “BTC profit taking rotating into alts,” Josh Olszewicz, known as CarpeNoctom on Twitter, told Cointelegraph. When Bitcoin consolidates, altcoins sometimes rise in price. The reverse can also happen when Bitcoin pumps and steals the show.
“XRP also had a technical breakout,” Olszewicz said, referring to a formation on the asset’s price chart called an inverse head-and-shoulders pattern. Olszewicz forecasted the move on Friday, posting a bullish chart while mentioning a $0.50 price target. “Prob the most bullish it’s looked in years,” he said in the Friday tweet.
Bitcoin (BTC), crypto’s leading asset, has increased tremendously in price over the past few weeks, knocking on the door of its all-time price high from 2017, near $20,000. Some altcoins have followed Bitcoin’s lead, although XRP has remained relatively quiet until its recent surge began last week.
Perhaps XRP’s most famous run to date occurred in January 2018, when the asset breached $3 per coin.
Ripple’s XRP Sees Explosive 1,151% Trading Volume Spike In November
XRP saw a 1,151% surge in trading volume on eToro as its price nearly tripled last month.
XRP saw a month-on-month 1,151% surge in trading activity in November on the eToro investment trading platform, according to the company’s latest report. This comes as the XRP price rallied to $0.92 on Coinbase at its monthly peak and closing the month with a 283% gain at around $0.61.
Spike In Retail Interest, Trading Activity
Bitcoin (BTC) was nearing $19,000 for the first time since December 2017 when large market cap altcoins like XRP started to surge in November.
The optimistic market sentiment around Bitcoin likely led traders to explore higher-risk, short-term trades. The result was a large surge in volume as traders rushed into altcoins.
Simon Peters, a market analyst at eToro, explained that XRP’s increase in month-on-month trading activity is entirely logical. He emphasized that trading volume typically accompanies large price moves. Peters said:
“Bitcoin has been the focal point for much of the crypto community, but altcoins are also making waves as investors look to alternative cryptoassets to diversify and make gains elsewhere. XRP’s increase in month-on-month trades is entirely logical in the context of November’s price rise. The token rose from $0.240 at the start of November to $0.661 at the end of it.”
Other likely factors include historic market trends and a spike in retail interest. In January 2018, the altcoin market saw a mania driven by retail investors. At the time, XRP and Ether (ETH) were the biggest drivers of the altcoin market’s rally.
In fact, over the past month, the Google search term “XRP” surged to its highest levels in three years, suggesting that retail traders were returning. The most likely reasons for this include XRP breaking out of a multiyear downtrend and the perceived “cheaper” value compared to Bitcoin in the eyes of the public.
As Cointelegraph reported, the demand for XRP also rose so quickly that Coinbase suffered a temporary server outage to the ire of its users.
Altcoins Following Bitcoin’s Lead In A Bull Market
Altcoins tend to rally and play catch-up when Bitcoin steadies during a bull market. This trend occurs because traders often look for higher-risk plays when the BTC price is consolidating.
Peters noted that Bitcoin saw an explosive price movement in November, and has seen minor, if not predictable, pullbacks. For altcoins, this is an ideal period for gains as it makes them more compelling for retail traders. Peters added:
“Bitcoin exploded in November, smashing through resistance level after resistance level, with only minor and relatively predictable retracements.”
On the other hand, altcoins are always at risk of a major crash in the event of a BTC price correction. During bull markets, altcoins are likely to follow the price movement of BTC albeit with more volatility, which puts altcoins at risk of extreme short-term price swings.
Nevertheless, technical analysis shows a bright outlook for XRP, whose price is now at the highest levels in over two years.
“The higher time frames give a clearer indication of where XRP is located in the market cycle,” trader Michaël van de Poppe noted in his latest XRP price analysis. “A multiyear downtrend was broken to the upside, meaning that dips will likely be considered as entry opportunities for traders.”
“With this in mind, if XRP holds $0.45 as support, continuation toward $1.00 is likely, particularly if Bitcoin price hits a new all-time high.”
Ripple CEO Walks Back Threat To Leave US
* Ripple used to position itself as the regulator-friendly crypto firm.
* Now the company is threatening to leave the U.S. over regulatory uncertainty.
* Lack of clarity from the SEC about XRP’s legal status looks to be the sticking point.
* The company is fighting several private investor lawsuits over the securities question and reportedly eyeing an initial public offering.
Ripple might not move out after all.
Six weeks after announcing he’s looking at potentially relocating Ripple’s headquarters because of the lack of regulatory clarity around the XRP cryptocurrency in the U.S., CEO Brad Garlinghouse is now taking a wait-and-see approach following the election of Joe Biden as U.S. president. Speaking to CNN’s Julia Chatterley on Wednesday, he said the payments firm hadn’t made any decision on the matter.
“We haven’t put a strict timeline on when we’ll make a decision” on relocating, he said. “I think I am waiting to see what dynamics change, associated with the Biden administration beginning their term in office, and I am optimistic that will actually improve where things sit for the XRP community broadly.”
Garlinghouse donated to the Biden for President campaign earlier this year, according to Federal Election Commission records. Last year, he donated to the Kamala Harris for the People campaign when she was a presidential candidate. Harris later dropped out of that race but is now the vice president-elect and will take office with Biden.
Garlinghouse’s remarks diverge from previous comments, when he indicated the prolonged but fruitless efforts to get federal regulators on the firm’s side seem to have exhausted the patience of Ripple’s executives as the company eyes a potential initial public offering (IPO) and fights a lawsuit.
Change Of Tone
For years, the payments startup, closely associated with the XRP cryptocurrency, held itself up as an example of good behavior. In 2016, for example, Ripple was the second company in the blockchain industry to obtain the infamously stringent BitLicense from New York State (and later added the architect of that regime to its board).
The firm’s CEO in those days, Chris Larsen, eschewed the then-fashionable term “disruptor” and stressed that unlike Bitcoin’s early adopters, Ripple aimed to assist, not usurp, regulated institutions. To do so it invested in multiple lobbying efforts in Washington.
Lately, the San Francisco-based company’s leaders have been notably less diplomatic. Current CEO Garlinghouse and Larsen, now executive chairman, have publicly threatened to move Ripple’s headquarters out of the U.S., citing the lack of regulatory clarity, particularly from the Securities and Exchange Commission (SEC). The company recently announced it opened a regional office in Dubai.
Ripple is still a far cry from, say, Binance, the global cryptocurrency exchange that has hopped from one jurisdiction to another and has refused to even say where exactly it is headquartered. But the Silicon Valley unicorn’s open discussion of a possible relocation marks a strategic shift, underscoring how the sector’s compliance challenges have grown more complex over the last half-decade.
“Ripple wants to embrace regulation. And when regulation is clear and consistently applied it does result in a predictable outcome,” the company’s general counsel, Stu Alderoty, told CoinDesk in a recent phone interview.
This, however, hasn’t been the case in the U.S., he said.
“Other jurisdictions made pretty significant advances,” Alderoty said, denying that a relocation would be regulatory arbitrage, the corporate practice of taking advantage of differing regimes. In other jurisdictions, “there is a high degree of comfort that the regulator won’t say [XRP] is a security one day,” he explained.
The company’s reasons to consider moving out are “general frustration, and the maturity of other jurisdictions parading that regulation clarity,” he said, adding that for Ripple, “it would be irresponsible not to explore those opportunities.”
To be clear, Ripple hasn’t committed to moving out of the U.S. definitively. Its leadership may just be saber-rattling in hopes of motivating regulatory agencies like the SEC to take action. It’s not out of the realm of possibility that Ripple will stay headquartered in the U.S. even if the SEC continues its business as usual.
Alderoty indicated Ripple would remain compliant with U.S. regulations and likely continue doing business in the country. The specific benefits Ripple would gain by moving out remain unclear, as is why Ripple would move out of the U.S. now.
The SEC’s future focus is itself unclear. Current Chairman Jay Clayton intends to step down before President-elect Joe Biden takes office in January. Biden will get to nominate a new chair, shaping the agency’s course for the next several years.
Compared to the rebellious figures of the early Bitcoin community, Ripple, founded in 2012, looked like your straight-laced aunt.
“For Bitcoin (BTC, +0.52%), the goal was to create a decentralized currency and ledger, independent from any government or central operator. For Ripple, the goal was to create a decentralized ledger that could work with and improve the foundation of today’s payment systems,” Larsen said in a 2015 interview with fintech maven Chris Skinner.
During that era, the main category of regulation that preoccupied digital currency businesses was the kind designed to prevent money laundering, sanctions violations and terrorism financing.
As early as 2014, Ripple introduced a feature that allows financial institutions to stop certain transactions on its network (which is now known as the XRP Ledger).
XRP, the network’s native currency, could not be frozen, but dollars or euros issued by a bank on the ledger could, allowing Ripple’s corporate users (then referred to as “gateways”) to cooperate with law enforcement requests.
“The individual freeze is intended primarily for complying with regulatory requirements,” the company said in a notice at the time.
“It also allows gateways to freeze individual account issuances in order to investigate suspicious activity. These features allow gateways to better operate in compliance of laws and regulations.”
Nevertheless, the following year Ripple was hit was one by of the industry’s first high-profile enforcement actions.
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) fined the company $700,000 for failing in its early days to register as a money services business (MSB) and to implement an anti-money laundering program.
The company cooperated with FinCEN and agreed to make “certain enhancements” to the Ripple Protocol “to appropriately monitor all future transactions” and regular compliance audits.
More recently, following the initial coin offering (ICO) boom of 2017, an additional type of regulation has come into play for the crypto markets: securities laws. And this area has proven trickier to navigate for Ripple.
In 2018, a group of investors sued Ripple, alleging the company’s periodic sales of XRP were unregistered issuances of securities. The case is now in the U.S. District Court of Southern California. In October, Judge Phyllis J. Hamilton dismissed most of the plaintiffs’ claims but left three, on which the hearings will now proceed.
“The lawsuit is a symptom of the absence of [regulatory] clarity in the U.S.” Alderoty said.
In the meantime, the SEC was becoming more aggressive in pursuing companies that sold tokens through ICOs. The agency effectively won its lawsuits against Telegram and Kik; while both suits resulted in settlements, the terms were generally favorable toward the SEC, making both companies pay fines for unregistered securities sales and, in the case of Telegram, putting an end to the project.
To be clear, Ripple did not conduct an ICO, but founders David Schwartz, Jed McCaleb and Arthur Britto “gifted” 80 billion XRP to the company, which then sold it to users. However, the climate for token-funded projects in general has been getting more and more threatening over the past two years in the U.S.
While Ripple has long insisted it did not create XRP, it is the largest holder of the cryptocurrency and has relied heavily on selling the asset. The company “would not be profitable or cash flow positive [without selling XRP],” Garlinghouse told the Financial Times in February. Ripple is also active on the buy side: the company is regularly purchasing XRP “to support healthy markets.”
“Ripple generates revenue from multiple sources, but as a private company we don’t break out the details,” Ripple spokesperson wrote to CoinDesk. “That said, Ripple does software enterprise sales – no different than Oracle or Salesforce. Ripple also has not sold XRP programmatically for over a year which is outlined in our quarterly markets reports.”
In previous years, Ripple sold XRP in two parallel ways: programmatically and over the counter (OTC). While the programmatic sales were paused in 2019, the OTC sales went on. According to the XRP Markets Reports published quarterly by Ripple, during 2020, the company has sold a little more than $70 million worth of XRP.
Hence, resolving XRP’s legal status is crucial for the company.
“Ripple put a lot of money in their regulatory work,” a source familiar with Ripple’s business told CoinDesk. “At the very minimum, they tried every means to push the SEC to issue the statement that XRP should not be regarded as a security.”
However, that did not happen, and seeing the SEC crack down on other token projects “it would be hard for Ripple not to worry about that,” the source said.
With XRP occupying an important place on Ripple’s balance sheet, if the SEC or a prolonged legal action ultimately deems the token a security, it might shake up the company’s entire business model.
Moving out of the U.S. won’t get Ripple out of the U.S. jurisdiction, Alderoty said, and the lawsuit would still proceed.
But relocation might spare Ripple some future struggles.
The situation might get especially tricky as Ripple is reportedly mulling an initial public offering, said Gabriel Shapiro, partner at the law firm of Belcher, Smolen & Van Loo.
“They probably debated and/or probed the likelihood of getting a registration statement approved by the SEC,” Shapiro said. “But if it seemed like the SEC would leverage the registration process to give them a hard time about XRP or other aspects of their business, then they might have decided to try accessing the public capital markets abroad instead.”
According to Alderoty, there are no legal obstacles for Ripple to move its headquarters out of the U.S. while the investor case is ongoing.
“Moving out is not an effort to avoid the jurisdiction of the US. We are a global company, but we will always have jurisdiction of the U.S.,” Alderoty said.
He declined to say if Ripple has considered launching an IPO overseas.
Asked if Ripple has been talking to regulators in other countries to make sure they won’t give the company a hard time, Alderoty said that in places like the U.K., reading public guidance can be enough to understand the rules.
However, “not necessarily in connection to our decision to move our headquarters, we have always engaged with regulators all around the world,” he added.
Prior to Wednesday’s CNN interview, a Ripple spokesperson would not say why its executives were suddenly saying they’d pack up and leave.
“Crypto regulation here in the U.S. is a guessing game – in part as evidenced by the recent [Department of Justice] report which cites eight different groups with regulatory oversight in the U.S. Some view crypto as a currency, some view crypto as a commodity, some view crypto as property and some view crypto as a security. We are not looking to avoid the rules. We just want to operate in a jurisdiction where the rules are clear,” the spokesperson said.
The spokesperson declined to clarify what exactly the benefit of moving might be if Ripple were still subject to U.S. regulations, as Alderoty said it would be.
95% of Ripple’s Customers Are Not From The US, CEO Garlinghouse Says
Potential customers in the U.S. are apparently holding off from using Ripple’s XRP-related services due to regulatory uncertainty.
As Ripple reportedly prepares to relocate its headquarters outside of the United States, it turns out that only 5% of the company’s clients are based in the country, according to the firm’s CEO.
On Dec. 2, Ripple CEO Brad Garlinghouse sat for an interview with CNN anchor Julia Chatterley to discuss Ripple’s regulatory hurdles in operating in the U.S.
According to Garlinghouse, as much as 95% of the San Francisco-based company’s customers are located abroad. He claimed that Ripple’s services are not as popular in the U.S. due to the ongoing regulatory uncertainty around its associate token XRP, Garlinghouse said:
“95% of our customers are non-U.S. customers, and only about 5% are here in the U.S. And people say ‘You are a U.S. company, […] why is that?’ One of the dynamics is that U.S. companies are waiting for clarity, and that clarity emanates from the Securities and Exchange Commission.”
Garlinghouse noted that the SEC recognized other major cryptocurrencies like Bitcoin (BTC) and Ether (ETH) as non-securities years ago. However, XRP, the third-largest cryptocurrency by market capitalization, still does not have that clarity:
“For us, around XRP and over 100 companies that are working with XRP getting that clarity, it’s very clear to me that XRP is being used by many companies as a currency. You had the U.S. Department of Justice refer to XRP as a currency, you had FinCEN refer to XRP as a currency. But you haven’t yet had that clarity from the SEC.”
According to Garlinghouse, Ripple has had some issues with U.S. customers concerned about the regulatory status of Ripple’s XRP-related offerings.
“Oftentimes when I’m speaking to customers, talking to them about our product that uses XRP in the payment flows, they will ask me about regulatory dynamics, and we have had customers saying ‘Look, until there’s clarity and regulatory frameworks, we’re going to hold off,’” the CEO said, adding, “Now that has not been the case because of the clarity and the certainty” in other countries like the U.K.”
Previous comments by Garlinghouse would suggest that Ripple is gunning for the SEC to treat XRP much the same as it has Bitcoin or Ether, that is, by not classifying it as as security. Last month, he said, “It’s very hard to look at XRP as a security,” stating that he is “not aware of any market globally that thinks that XRP is a security.”
Ripple CTO Says Community Could Force The Company To Burn 48 Billion XRP
Ripple could be forced to burn its entire XRP holdings if the community votes for it, the company’s CTO David Schwartz has confirmed.
Ripple chief technology officer David Schwartz has admitted the company could be forced by validators to burn its 48 billion XRP tokens, regardless of if it agrees with the decision or not.
The company currently holds half the total XRP supply and has come under fire from the community for selling off tokens in the past, although it resolutely refuted claims of price manipulation and has stopped the practice in recent times.
In a Twitter thread, Schwartz confirmed that the community could vote for Ripple to burn their entire supply of XRP tokens, stating that the blockchain is “very democratic.”
“There would be nothing Ripple could do to stop that from happening.”
XRP Ledger amendments require an 80% approval rating from the ledger’s validators and are activated if they stay above that threshold for two weeks. In June, validators on the XRPL notably voted to adopt a new amendment, dubbed “the Checks Amendment,” without support from Ripple.
The amendment introduces the ability for users to write checks to each other for a predetermined amount of XRP that can be redeemed at a later period.
Schwartz’s comments come as something of a postscript to an incident in November last year in which it was revealed Ripple could also unilaterally decide to burn the billions in excess supply. At the time Stellar had just reduced its total supply of 105 billion XLM tokens down to 50 billion.
Schwartz hit out at the Stellar Development Fund for burning more than 50% of the total XLM tokens writing:
“Too bad XRP is decentralized or someone could just burn half the supply and raise the price to 29 cents.”
Stellar Co-Founder Jed Mccaleb Fired Back That Ripple Could Burn Just As Many Tokens, Just As Easily:
Schwartz conceded that it could be done, explaining that it would have to be through a non-traditional method like using the tokens as fees or sending them to an account that could never be accessed.
Ripple has been the subject of long-standing criticism for routinely selling tokens. According to a report in early 2020 by XRPArcade, the firm sold an average of 196 million XRP per month since December of 2017. As of April, a total of 5.5 billion XRP had been sold, or $3.45 billion at the time of writing.
In the second and third quarters this year, Ripple stopped selling XRP and started buying back the tokens to support its price. In Q3, the firm purchased $45.5 million in XRP.
University’s Epic Burn: Researchers Say Ripple’s Protocol ‘May Fail Badly’
According to researchers at the University of Bern, the presence of faulty or malicious nodes on the Ripple network could have “devastating effects.”
Researchers from the University of Bern have released a report claiming Ripple’s consensus protocol “ensures neither safety nor liveness.”
In a blog posted yesterday from the university’s Cryptology and Data Security Research Group, researchers Christian Cachin, Amores-Sesar, and Jovana Mićić released an analysis alleging the payment firm’s consensus protocol could allow users to potentially “double-spend a token” and halt the processing of transactions.
The trio set up examples of the Ripple protocol using different numbers and types of nodes to illustrate possible violations of safety and liveness (a term for the network continuing to process transactions and makes progress). According to their models, the presence of faulty or malicious nodes could have “devastating effects on the health of the network.”
“Our findings show that the Ripple protocol relies heavily on synchronized clocks, timely message delivery, the presence of a fault-free network, and an a-priori agreement on common trusted nodes with the [Unique Node List] signed by Ripple,” said the researchers.
“If one or more of these conditions are violated, especially if attackers become active inside the network, then the system may fail badly.”
David Schwartz, chief technology officer at Ripple, quickly responded to Cachin on Twitter disputing the findings. The Ripple CTO argued such a situation was “impractical,” stating any attacker would have “to both partition the network” and control part of its Unique Node List, or UNL, to do as the researchers proposed.
“The overall philosophy of the UNL is that attackers get one chance to jeopardize liveness and then they are forever off the UNL,” said Schwartz. He added:
“Attacks on safety also require significant control over the propagation of messages on the network, which makes them impractical. This is why Bitcoin’s complete lack of partition tolerance isn’t a practical problem.”
None of the researchers have yet responded to the Ripple CTO’s criticism of their findings. The group admitted in the original analysis thathe attacks were “purely theoretical and have not been demonstrated with a live network.”
Ripple CEO Warns SEC May Sue Company Over XRP Sales
The U.S. Securities and Exchange Commission (SEC) intends to sue Ripple over its sale of XRP, CEO Brad Garlinghouse said Monday.
According to Fortune, the lawsuit will be filed in the near future, though no specific date has been provided yet. The suit had not been filed as of press time. Ripple cofounder Chris Larsen and Garlinghouse will be named defendants alongside the firm, Garlinghouse said.
“It’s an attack on the entire crypto industry and American innovation,” Brad Garlinghouse said in an emailed statement.
In an emailed statement, outside counsel Michael Kellogg, of Kellogg, Hansen, Todd, Figel & Frederick said, “This complaint is wrong as a matter of law. Other major branches of the U.S. government, including the Justice Department and the Treasury Department’s FinCen, have already determined that XRP is a currency.
Transactions in XRP thus fall outside the scope of the federal securities laws. This is not the first time the SEC has tried to go beyond its statutory authority. The courts have corrected it before and will do so again.”
Ripple received word Monday that the SEC intended to sue, according to the Wall Street Journal.
Ripple is already being sued by XRP (-13.44%) investors in a putative class-action lawsuit, on claims that the company said XRP’s price would rise. That suit, which began in 2018, continues its course through the courts.
The company has previously paid $700,000 in fines on charges it violated aspects of the Bank Secrecy Act brought by the Financial Crimes Enforcement Network (FinCEN), as well as an additional $450,000 in fines to the U.S. Attorney’s Office for the Northern District of California.
Garlinghouse’s move Monday is reminiscent of how messaging platform Kik announced the SEC would file suit against it for raising $100 million to build Kin. Kik later settled the case.
Crypto company CEOs warning the broader industry of upcoming regulatory actions may be a bigger trend. Coinbase chief Brian Armstrong previewed potential U.S. Treasury Department rulemaking last month, weeks before FinCEN published a proposal for rulemaking.
XRP was developed and launched by Larsen’s Ripple Labs co-founder Arthur Britto and tech chief David Schwartz in 2012. Ripple maintains 55 billion XRP in escrow, releasing 1 billion every month. Unused XRP is returned to escrow.
According to Messari, Ripple has sold about $1.2 billion in XRP over the years.
XRP’s price fell after news of the impending lawsuit came out, dropping 12% on the 24-hour trading period to below 50 cents. The cryptocurrency’s price had already begun falling earlier in the day, joining a broader market decline.
An SEC spokesperson did not immediately return a request for comment. After the publication of this article, a Ripple spokesperson emailed the following statement, attributed to Garlinghouse:
* The SEC is fundamentally wrong as a matter of law and fact. XRP is a currency, and does not have to be registered as an investment contract. In fact, the Justice Department and the Treasury’s FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.
* The SEC has permitted XRP to function as a currency for over eight years, and we question the motivation for bringing this action just days before the change in administration. Instead of providing a clear regulatory framework for crypto in the U.S., Jay Clayton inexplicably decided to sue Ripple – leaving the actual legal work to the next Administration.
* This is an attack on the entire crypto industry and American innovation. By giving the stamp of approval only to Bitcoin and Ether (whose networks are at the mercy of the Chinese Communist Party), the SEC has picked the winners – disregarding an entire industry outside of these two tokens.
Ignoring advice from national security experts and the U.S. government, Jay Clayton is handing over the future of our global financial systems – underpinned by blockchain and crypto technologies – to an authoritarian regime.
* We are right and will aggressively fight – and win – this battle in the courts to get clear rules of the road for the entire industry in the U.S. We are on the right side of the law, the right side of policy and will absolutely be on the right side of history. In the meantime, it’s business as usual for Ripple and our hundreds of customers made up of the world’s top financial institutions that have come to depend on Ripple to deliver high-value solutions.
XRP Price Plunges 21% In Two Days As SEC Targets Ripple — What’s Next?
The XRP price correction is exacerbated by reports of a looming lawsuit against Ripple.
XRP price declined by 21% in two days on Coinbase from $0.5695 to $0.4491. The drop was accelerated by reports on Dec. 22 that the United States Securities and Exchange Commission is preparing a lawsuit against Ripple.
Brad Garlinghouse, the CEO of Ripple, said the SEC “voted to attack crypto,” citing a Fortune article. He wrote:
“Today, the SEC voted to attack crypto. Chairman Jay Clayton — in his final act — is picking winners and trying to limit US innovation in the crypto industry to BTC and ETH. We know crypto and blockchain technologies aren’t going anywhere. Ripple has and will continue to use XRP because it is the best digital asset for payments — speed, cost, scalability and energy efficiency. It’s traded on 200+ exchanges globally and will continue to thrive.”
XRP price fell by roughly 13% following Garlinghouse’s tweet as some industry executives expressed concerns about the situation.
Meanwhile, cryptocurrency traders are mixed about where XRP is headed next. Some say that it might not have an immense impact on the price as Ripple faced regulatory hurdles before. Others believe XRP could continue to stagnate as a result.
Ripple’s Situation Is Different From Block.One, Says Lawyer
One of the main discussion points of the reported lawsuit against Ripple by the SEC is the difference between Ripple and Block.one.
Block.one, the company behind the EOS ecosystem, settled with the SEC for $24 million before there was active litigation.
Since Ripple expects to deal with active litigation, the dealings between Block.one and the SEC are different from Ripple’s case. Jake Chervinsky, a general counsel at Compound Finance, said:
“No. The EOS action only dealt with the EOS ERC-20 token on Ethereum, not the EOS native token on the EOS blockchain. Block[dot]one settled without active litigation, & by then, the ERC-20 token was no longer trading. Here, SEC will allege an actively-traded token is a security.”
Chervinsky also raised the possibility of centralized exchanges temporarily delisting XRP while the case is pending. Since there is no historical precedence for this type of regulatory conflict, this remains uncertain. He wrote:
“We’ll have plenty of time to talk about the merits of the SEC’s Ripple enforcement action after the complaint comes out. Right now, the big question is if centralized exchanges delist XRP while the case is pending. I bet a lot of lawyers are setting emergency calls right now.”
Immediately after the news broke, the social media volume for the keyword “XRP” surged, according to analysts at Santiment.
What happens to the XRP price now?
XRP price rallied strongly throughout November, breaking a multi-year downtrend, as the Bitcoin (BTC) price surpassed $18,000. At the time, XRP saw an impulse rally on Coinbase, seeing a brief “fear of missing out” uptrend in the U.S. market.
Trader and Cointelegraph Markets analyst Michaël van de Poppe emphasized that after a massive impulse wave, a heavy retracement is likely. He explained:
“XRP looking for further correction as it tests the $0.45 range for the third time, while consistently making lower highs. Very natural to see less volatility & a correction after such an impulse wave.”
Some traders, however, say that after this pullback, XRP may consolidate and that the lawsuit could turn out to be a “nothing-burger.”
“In all seriousness though, $XRP being sued by the SEC will most likely be a nothing-burger. Not the first time,” wrote pseudonymous trader “Loma,” who continued: “The fine probably ends up being a slap on the wrist relative to how much $ they’ve made/have. Market is corrective, most ALTs look like s—. XRP isn’t alone.”
Meanwhile, other traders argue that the heavy-hitting approach of regulators could amplify the negative market sentiment around XRP and push the price down further. As the chart above shows, the sentiment around XRP hit fresh lows as news of the SEC lawsuit was revealed.
Don’t Expect Coin Center To Stick Up For XRP In The Face Of The SEC
The D.C.-based think tank doesn’t view XRP in the same light as Bitcoin or Ethereum.
In its coming fight against the Securities and Exchange Commission, Ripple won’t see support from some of the mainstays of the crypto lobby. Jerry Brito, the executive director of Coin Center, made it clear on Tuesday that his organization won’t put up any resistance to the notion that XRP is a security.
In response to a question about Coin Center’s work to keep XRP from the SEC’s purview, Brito posted two articles where Coin Center argues why Bitcoin and Ethereum aren’t securities before pointing to the absence of such a post for Ripple:
Coin Center is a nonprofit advocacy and research group supporting the development of crypto-friendly public policy. The organization began its Bitcoin-related advocacy work in 2014.
Ripple has been battling the SEC for years over whether XRP is a security that should fall under the purview of the federal securities regulator. Although Ripple has tried to distinguish itself from XRP, it holds more than half of the total token supply. Many argue that XRP meets the Howey Test, which considers securities to be any type of investment where profits depend on the work of a third-party.
The SEC’s pending lawsuit against Ripple was announced by CEO Brad Garlinghouse, who took to Twitter late Monday to gauge public opinion.
The price of XRP has been in freefall since Garlinghouse decided to make the alleged lawsuit public. The third-largest cryptocurrency by market cap plunged below $0.50, recording a double-digit percentage drop.
According to Garlinghouse, a securities designation by the SEC isn’t the end of the world for Ripple or XRP. He told the Pomp Podcast last month that “more than 90% of RippleNet customers are outside of the United States.”
Nevertheless, such a designation would require that U.S-based investors complete broker-dealer registeration with the SEC in order to hold XRP, which is a possible hindrance to adoption.
An SEC Victory In Ripple Case Would Render XRP ‘Untradeable,’ Market Pros Say
The market for XRP could quickly dry up, causing prices to suffer, if the U.S. Securities and Exchange Commission (SEC) ultimately prevails in an expected lawsuit against Ripple Inc., analysts and traders said.
Ripple’s chief executive officer, Brad Garlinghouse, warned Monday the SEC could file a lawsuit in the near future against his company over its sales of XRP, the third-largest cryptocurrency by market cap. Following the news, XRP’s price dropped sharply, losing as much as 14% before rebounding slightly.
While the case has yet to be filed, and could take years to resolve, some market experts warn that if the SEC proves in court that XRP is a security, the cryptocurrency could end up without an adequate market, all else being equal. That’s because as of now the majority of crypto trading venues are not licensed to deal in securities.
“Many cryptocurrency exchanges would be forced to delist it, so liquidity would dry up,” said Ryan Watkins, a research analyst at Messari. XRP’s price would “crash hard” in this scenario, he said.
Exchanges that continue listing XRP run the risk of being asked to register as securities exchanges by the SEC should the commission win its lawsuit. Otherwise, these exchanges might face penalties for allowing retail consumers to trade an unregistered security.
Already, CrossTower, a small exchange that opened in June, has delisted the cryptocurrency.
“CrossTower’s listing committee evaluates tokens along multiple dimensions,” said Kristin Boggiano, the firm’s president. “One of the criteria is whether an asset is a security. Given the uncertainty regarding XRP’s status, CrossTower has decided to delist XRP.”
While CrossTower is a popcorn stand compared to Coinbase or Binance, its deliberations could foreshadow how these larger trading platforms view XRP.
CrossTower is a member of the Coinbase-led Crypto Rating Council, an organization launched last year to provide some clarity on which digital assets might resemble securities. The project assessed that XRP more closely resembles a security than a non-security, giving the asset a score of 4 out of 5 (5 being a clear security).
The scores are not meant to serve as legal advice but represent member exchanges’ views on certain digital assets. In addition to CrossTower, Bittrex and Kraken are members of the group.
Coinbase, Bitstamp and Binance US declined to comment. Kraken did not respond to a request for comment by press time.
Short, Intermediate And Long Term
To be clear: Delisting would be an intermediate-term risk for XRP, but it’s far from a fait accompli.
“Odds XRP gets delisted on the SEC developments are low. The news represents, in my opinion, short-term noise as far as price goes,” said trader and analyst Alex Kruger. “I do think it should underperform for a while longer. Market participants are very concerned about the XRP-SEC news and possible delisting, and we’ve seen lots of top buyers.”
But John Willock, CEO of Tritum, a diversified crypto services provider, said that if XRP ends up being designated a security, “it would very likely render the asset untradeable for most exchanges and industry participants. That immediate disappearance of a massive portion of market liquidity and participants would cause the asset to dump heavily in price.”
Among the current crop of crypto investors, “very few people would want to hold and deal with the cost and complexity of owning and interacting with a security instrument,” Willock added.
Jay Hao, CEO of Malta-based crypto exchange OKEx, agreed with that assessment.
“It’s likely we would see a sharp sell-off of XRP, leading to a decline in its price,” he told CoinDesk. Hao did not respond by press time to a follow-up question about whether his exchange would delist XRP if it is designated a security.
While institutional investors have lately been dipping their toes into the crypto pond, those large players are generally focused on bitcoin and ether. The part of the crypto market that includes XRP is still dominated by individual investors, according to experts who spoke to CoinDesk. If exchanges stop supporting XRP, retail investors would have no way to trade it.
Nevertheless, the damage would not necessarily be fatal for XRP.
“There are various ways the SEC could grant special operating conditions, or accept a payment of a settlement from Ripple that could dampen the blow,” Willock said.
Hao similarly said that declaring XRP a security could potentially have a positive impact on the cryptocurrency’s value down the line.
“This call could eventually allow Ripple to list on traditional stock exchanges and potentially open it up to a far wider market, which means that there could be extremely positive price action in the long term,” Hao said.
XRP was developed and launched in 2012 by Ripple Labs co-founders Arthur Britto and Jed McCaleb and tech whiz David Schwartz, who gifted a large portion of the token to the startup. The company has sold about $1.2 billion in XRP since then, according to Messari.
Ripple, which has long insisted it did not create and does not control XRP, did not respond to a request for comment by press time. In an appearance on CNBC Tuesday, Garlinghouse called the SEC’s position on XRP “one foot out the door.”
“Not a single other country anywhere has looked at XRP as a security,” he said. “You’ve had countries like the U.K. and Japan and Switzerland and Singapore all come out and say things that make it clear that XRP is a currency.”
Garlinghouse also told viewers the token’s fate was independent of his company’s.
“If Ripple the company didn’t exist, XRP would still thrive around the globe with … a couple hundred exchanges around the world,” he said. “And there’s over 100 different projects, innovative entrepreneurs here in the U.S. and around the world building on top of XRP.”
SEC Unveils Suit Against Ripple, Calling XRP A ‘$1.3B Unregistered Securities Offering’
The commission is alleging Garlinghouse, Larsen and Ripple have participated in an “unregistered, ongoing digital asset securities offering” to investors since 2013.
The United States Securities and Exchange Commission has taken legal action against Ripple as well as its CEO, Brad Garlinghouse,and co-founder Christian Larsen.
In charges filed today in federal district court in Manhattan, the commission is alleging that the XRP token is classified as a security and is accusing Ripple and the two executives of raising more than $1.3 billion through an “unregistered, ongoing digital asset securities offering” to investors beginning in 2013. The SEC further alleges that Ripple distributed XRP for “labor and market-making services” and that Garlinghouse and Larsen failed to register their personal XRP sales, estimated at $600 million.
“[These actions] 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,” said Stephanie Avakian, director of the SEC’s Enforcement Division.
Under SEC regulations, individuals and crypto firms must register their offerings with the commission or under an exemption if they qualify as securities. Which tokens qualify as securities, however, remains an extremely contentious subject. The crypto industry has been waiting for clarity from the SEC or new legislation on the subject for a long time.
Meanwhile, the SEC said that Garlinghouse and Larsen failed to register XRP when it served as an investment in Ripple and to enrich the pair personally. The firm and its two leaders could face disgorgement of their gains as well as civil penalties.
News of the coming SEC lawsuit broke yesterday, causing a steep drop in the price of XRP — at the time of publication, the token is valued at $0.45, having fallen more than 20% in the last week. Garlinghouse addressed the charges on Twitter, saying that the SEC “voted to attack crypto.”
“The SEC is doing the opposite of ‘fostering innovation’ here in the US,” said Garlinghouse, referencing the commission’s FinHub announcing it would become a stand-alone office earlier this month. “It’s not just XRP they’re attacking here.”
Ripple board member and SBI Holdings CEO Yoshitaka Kitao said he was “optimistic that Ripple will prevail in the final ruling.” Kitao stated he believed Japan’s financial watchdog “has already made it clear that XRP is not a security” and expected a similar result from U.S. regulators.
David Schwartz, chief technology officer of Ripple, was seemingly less hopeful than Kitao when responding to the charges on Twitter:
“The United States is one of the few countries where regulators will, after years of you operating in full light of day and frequently updating them on everything you’re doing, turn around and tell you that you should have known you were breaking decades old laws all along. Apropos of nothing, of course.”
Garlinghouse announced the SEC’s impending action last night. In November, he said that because the majority of RippleNet customers are based outside of the United States, a securities designation wouldn’t necessarily adversely affect the company’s underlying business. Earlier this year, Larsen said Ripple is considering relocating outside the U.S. amid growing frustration at the lack of regulatory clarity.
Bitwise Dumps XRP Investment Amid SEC Lawsuit Against Ripple
The Bitwise 10 Crypto Index Fund has liquidated its XRP holdings.
Bitwise Asset Management, one of the largest crypto fund managers, has fully divested from XRP amid the regulatory backlash against Ripple.
In an official press release, Bitwise announced Wednesday that its position in XRP has been liquidated because its fund “does not invest in assets that are reasonably likely to be deemed securities under federal or state securities laws.”
“Bitwise’s decision to liquidate its position in XRP was based on consideration of new public information from the SEC’s complaint.”
Bitwise’s crypto index fund was launched in 2017 to provide institutional investors with digital-asset exposure. Assets under management surpassed $100 million in October thanks to large inflows from advisers, families and hedge funds.
XRP’s price has been in freefall the past few days amid revelations that the United States Securities and Exchange Commission was suing parent company Ripple for issuing a “$1.3 billion unregistered securities offering.” The lawsuit, which was outlined in a detailed 71-page complaint, is the culmination of a multiyear investigation by the securities regulator.
The Summary Of The Lawsuit Reads:
“From at least 2013 through the present, Defendants sold over 14.6 billion units of a digital asset security called ‘XRP,’ in return for cash or other consideration worth over $1.38 billion U.S. Dollars (‘USD’), to fund Ripple’s operations and enrich Larsen and Garlinghouse.”
Bitwise isn’t the only organization exiting the XRP trade. Smaller exchanges such as OSL, Beaxy and CrossTower have either temporarily halted trading or removed XRP entirely from their offerings.
Ripple CEO Brad Garlinghouse is urging investors and employees to not worry about the lawsuit but stressed that the legal battle could take a long time to finalize. In the meantime, RippleNET has very few business operations in the U.S., which could, theoretically, allow the company to relocate overseas. Ripple has not indicated any such plans in the near term.
MoneyGram Takes Wait-and-See Approach As SEC Sues Partner Ripple
MoneyGram has yet to see any “negative impact” on its longstanding business arrangement with Ripple from the U.S. Securities and Exchange Commission’s (SEC) lawsuit against the latter company.
“MoneyGram will continue to monitor the situation as it evolves,” a company spokesperson told CoinDesk in an emailed statement. “MoneyGram has continued to utilize its other traditional FX trading counterparties throughout the term of the agreement with Ripple.”
The SEC alleged in a case filed Tuesday that Ripple used XRP (-25.17%), the cryptocurrency two of its founders created, to conduct an ongoing, $1.3 billion sale of unregistered securities.
Ripple owns more than 4% of MoneyGram and paid MoneyGram $9.3 million in the third quarter of this year for providing liquidity for Ripple’s XRP-based cross-border settlement network. All in, Ripple has given MoneyGram $52 million for using Ripple’s on-demand liquidity (ODL) service.
On-demand liquidity through Ripple’s xRapid cross-border payment service allows companies to transfer funds from one currency to XRP and from XRP to another currency. This allows enterprises to avoid opening a bank account in countries they want to send payments to, letting them avoid holding funds there for cross-border transactions.
MoneyGram, currently the second-largest money transfer provider in the world behind Western Union, has used Ripple’s ODL to move in and out of four currencies since June 2019. At the time, CEO Alex Holmes said MoneyGram was becoming a “chief partner for cross-border settlement using digital assets.”
In the complaint filed Tuesday, the SEC seems to make a mention of MoneyGram when it alleges that “onboarding onto ODL was not organic or market-driven” but rather “subsidized by Ripple.”
MoneyGram was not identified by name in the SEC complaint though it did specify that Ripple paid the unnamed money transmitter $52 million in fees through September 2020, in an arrangement that began in 2019.
“The Money Transmitter became yet another conduit for Ripple’s unregistered XRP sales into the market, with Ripple receiving the added benefit that it could tout its inorganic XRP ‘use’ and trading volume for XRP,” the SEC alleged.
MoneyGram declined to comment further.
3 Reasons Why XRP Price Can Continue To Fall After A 63% Crash In Four Days
XRP price dropped to as low as $0.2138 on Binance as three key factors pushed the cryptocurrency down.
XRP price dropped steeply below $0.3 on Dec. 24, hitting as low as $0.2138 on Binance. The selling pressure on XRP has intensified in the aftermath of the high-profile lawsuit filed by the United States Securities and Exchange Commission against Ripple.
There are three main factors behind XRP’s sharp price drop, namely the SEC lawsuit, likely delisting by exchanges and worsening market sentiment.
Ripple Lawsuit Is Worse Than EOS And Kik, Investor Says
This isn’t the first high-profile lawsuit or settlement the SEC has had with a blockchain firm or a token.
EOS and Kik both settled with the SEC, and according to Cinnemhain Ventures’ Adam Cochran, they were considered as security violations at the point of sale.
In regards to XRP, Cochran emphasized that the SEC is alleging the cryptocurrency is still in violation of securities law. He said:
“Unlike Kin and EOS, where the SEC alleged the securities violations were just at the point of sale, the SEC is alleging here that $XRP is *STILL* in violation of securities law present day. That means they believe it is currently a security, hence the exchange reactions.”
Several attorneys similarly noted that Ripple could struggle to plead ignorance due to the documents cited in the lawsuit. Hence, the lawsuit becomes more complex for Ripple to deal with, considering that CEO Brad Garlinghouse said he would fight it out. Cochran said:
“They’ve got multiple document points of proof of centralization, acknowledgment of securities issues, and selling practices in writing. There is no room to plead ignorance/stupidity here. They’ve personally named the executives as liable, which the SEC does when they go for a kill shot. This is much more common in fraud action than general securities action.”
Exchange Delistings Are Happening
Cochran also stated that some sources suggested Coinbase had discussions with counsel about the delisting of XRP.
Exchanges do not have to delist XRP yet. If it is declared a security by the court, however, lawyers said that exchanges could face various risks and may be forced to delist the token preemptively. Cochran wrote:
“Sources suggesting that Coinbase has already had discussions with counsel about the delisting of $XRP. It seems two potential plans are forming, one which puts the delisting on Friday. Unclear which Coinbase products it will impact but most likely Coinbase and Pro.”
Social Media Sentiment Worsens
Data from Santiment show the social media sentiment around Ripple has significantly declined.
According to Santiment, social media discussions around crypto are still dominated by XRP and the SEC’s lawsuit. Santiment analysts said:
“The topics most prominently being discussed today are dominated by $XRP and #Ripple, as the #SEC has charged the company with selling securities.”
Data from The Tie also shows that the daily sentiment score dropped to its second-lowest level ever this week, while tweet volume spiked to record highs.
MoneyGram Distances Itself From Ripple, Says It Doesn’t Utilize RippleNet
MoneyGram sheds light on the nature of its partnership with Ripple.
Global money transfer service MoneyGram has clarified the nature of its collaboration with its blockchain partner Ripple following the latter’s recent probe by the U.S. Securities and Exchange Commission.
In a press statement issued on Dec. 23, MoneyGram revealed that it has never utilized Ripple’s counterparty services, namely On-Demand Liquidity (ODL) and RippleNet, for forex transactions.
“As a reminder, MoneyGram does not utilize the ODL platform or RippleNet for direct transfers of consumer funds – digital or otherwise. Furthermore, MoneyGram is not a party to the SEC action.”
The Company Added:
“MoneyGram has continued to utilize its other traditional FX trading counterparties throughout the term of the agreement with Ripple, and is not dependent on the Ripple platform to accomplish its FX trading needs.”
Back in June 2019, Ripple and MoneyGram entered into a strategic partnership for cross-border payments. As part of the collaboration, Ripple was to invest up to $50 million in exchange for MoneyGram stock.
In February, MoneyGram also revealed an additional $11.3 million investment from Ripple. However, as previously reported by Cointelegraph, Ripple has sold about $15 million of its stake in MoneyGram.
MoneyGram’s revelation of not being dependent on Ripple’s services falls in line with previous events. Earlier in the year, the money transfer giant debuted a real-time remittance service based on Visa and not its blockchain partner.
Another Ripple collaborator Intermex also revealed back in March that it wasn’t using the company’s platform for remittance in its “core market.”
MoneyGram’s statement is the latest in a series of actions taken by companies with relation to either Ripple or XRP. On Wednesday, investment fund Bitwise Asset Management liquidated its XRP holdings.
Several crypto exchanges have also started to delist the XRP token with Coinbase reportedly considering its options. The fallout from the SEC lawsuit has also exerted negative pressure on the XRP price action, shedding over 30% on Wednesday.
Coinbase, Other Big Exchanges ‘Between Rock And A Hard Place’ On Delisting XRP
What happens when a cryptocurrency once positioned as a regulator-friendly alternative to bitcoin gets heat from regulators? Exchanges that trade XRP are about to find out.
U.S.-based cryptocurrency exchanges have to consider whether to delist XRP in light of a Securities and Exchange Commission (SEC) lawsuit alleging it is an unregistered security issued by Ripple Labs to raise funds.
Chief among these exchanges is Coinbase, which, in addition to the normal considerations around listing XRP, is also seeking SEC approval to take its shares public and allow retail investors to trade them. If the SEC prevails in its lawsuit, XRP may be classified as a security, meaning under U.S. law entities offering it for trading must register as securities exchanges.
It’s also possible an SEC victory would destroy XRP’s value because the regulator wants to prevent Ripple from selling any more tokens, and for Ripple, CEO Brad Garlinghouse and Chairman Chris Larsen to disgorge their profits, pay prejudgement interest and pay civil penalties.
While some exchanges, market makers and funds have already begun delisting XRP or exiting positions and transactions with the cryptocurrency, it may not be a black-and-white question for larger exchanges.
Anthony Tu-Sekine, a partner at law firm Seward & Kissel LLP, told CoinDesk that trading platforms like Coinbase “are between a rock and a hard place.”
“They can continue to list XRP based on their previous analysis that XRP is not a security, with the hope that a court will find that XRP is not a security,” he said. “Or they can take ‘remedial’ actions such as restricting trading for wallets held by U.S. persons, or take it off their exchange altogether.”
These scenarios are likely already covered by the exchanges’ terms of service policies, he said.
Exchanges like Coinbase would “be crazy not to consider” delisting, said Gabriel Shapiro, an attorney with Belcher, Smolen & Van Loo LLP. Considering the question isn’t the same as actually delisting – or not delisting – the cryptocurrency, however.
“They have to think – including just from a business perspective but also legal – what kind of precedent they’re setting,” he said. “If they delist one [cryptocurrency] just because a regulator accuses it of being a security, what happens the next time that happens? Have you just given the SEC the right to delist anything from your platform just because [it makes] an accusation?”
Delisting digital assets on that basis may not be great for the exchange’s customers, said Shapiro.
“It’s not an easy decision for [Coinbase] to just delist and, personally, if I were them I don’t think I would delist unless I had something more concrete to point to,” he said.
A Coinbase spokesperson declined to comment for this article.
What Might Happen
Coinbase in particular is in a unique position due to its impending initial public offering (IPO) or direct listing. It has already confidentiality filed its S-1, a form companies use to register their shares as securities. The SEC can provide feedback to the company about how it views potential risk factors or other aspects of its operations.
Last week, Shapiro told CoinDesk that this could include essentially forcing companies to take certain actions. While noting he does not believe the SEC would explicitly tell Coinbase to delist XRP, the agency could say that not delisting XRP might be a risk factor.
“You could say, ‘In your risk factors you haven’t properly explained to your investors in your IPO how it is you’ve let XRP and others trade on Coinbase … You need to be really really clear about that … including that we might come after you Coinbase, because you’ve been warned,’” he said.
Coinbase could then decide to delist XRP based on this feedback, or if the compliance burden is too much it could even scrap its IPO ambitions.
What Coinbase cannot do is pretend ignorance of how the SEC views XRP, Tu-Sekine said. The agency’s position is clear.
The SEC appears confident about its chances, and has helpful precedents from its cases against Telegram and Kik, Shapiro said.
“I think we all suspected there’d be a strong case but I don’t think we realized the extent to which Ripple entered into market-making agreements,” he said of the allegations in the SEC’s complaint.
Bitstamp To Halt XRP Trading, Deposits In US Due To SEC Lawsuit
Cryptocurrency exchange Bitstamp said it’s halting XRP trading and deposits for all U.S. customers on Jan. 8, 2021, because of the U.S. Securities and Exchange Commission’s recent filing, alleging XRP is a security.
U.S. customers will be able to withdraw their XRP even after trading is halted, Bitstamp said.
Other countries are not affected, Bitstamp said.
Bitstamp is the first major cryptocurrency exchange to take action on XRP (+19.43%) in response to the SEC’s lawsuit against Ripple Labs.
SEC vs. Ripple: A Predictable But Undesirable Development
Such regulation by enforcement does indeed run the risk of stifling important and valuable innovation in the crypto space.
The U.S. Securities and Exchange Commission has not been kind to crypto in the past year. In March 2020, in the SEC v. Telegram case, the Commission won a worldwide injunction against the proposed issuance of Grams by Telegram, undoing years of innovative work even in the absence of any allegations of fraud.
Then, on the last day of September 2020, Judge Alvin K. Hellerstein dashed the hopes of Kik Interactive by ruling in favor of the SEC’s motion for summary judgment in SEC v. Kik Interactive, halting the sale of Kin crypto tokens.
Both of these actions were filed in the Southern District of New York. On Dec. 22, 2020, the SEC decided that it was time to initiate another high-profile action, filing in the same district against Ripple Labs and its initial and current CEOs, Christian Larsen and Bradly Garlinghouse, respectively, for raising more than $1.38 billion through the sale of XRP since 2013.
The initial fallout from this action has been swift and severe: 24 hours after the lawsuit was filed, the price of XRP was down almost 25%. This still left XRP ranked fourth on CoinMarketCap, with a total market capitalization of over $10.5 billion.
In its complaint, the Commission paints a straightforward pattern of sales of XRP that were never registered with the SEC or made pursuant to any exemption from registration. From the perspective of the Commission, this amounts to a sustained practice of illegal sales of unregistered, non-exempt securities under Section 5 of the Securities Act of 1933.
For readers not familiar with legal procedure, it might seem unusual for the case to be brought in a New York federal court, especially since Ripple is headquartered in California, and both named individuals reside there.
However, Ripple has an office in the Southern District of that state, some statements were made by Garlinghouse while he was present in New York, and significant sales of XRP were made to New York residents. In legal parlance, this would make venues in the Southern District of New York appropriate.
In addition, it might be surprising to some that both Larsen and Garlinghouse were named personally in an action that seeks primarily to recover for XRP allegedly sold illegally by Ripple, through its wholly-owned subsidiary, XRP II LLC.
They are named both because they individually also sold significant volumes of XRP — 1.7 billion by Larsen and 321 million by Garlinghouse — and because the SEC contends they “aided and abetted” Ripple in its sales.
Aiding and abetting is a cause of action that depends on a primary violation by a third party, in which the aider and abettor voluntarily and knowingly participates with the goal of assisting in the venture’s success.
In this case, Ripple would be the primary violator, and both Larsen and Garlinghouse are alleged to have substantially participated in the pattern of Ripple’s XRP sales, with the goal of allowing the company to raise funds without registering XRP under the federal securities laws or complying with any available exemption from registration.
The bulk of the complaint provides an overview of digital assets, details the SEC’s version of the history of Ripple and its marketing efforts with regard to XRP, illustrates how in the opinion of the Commission, XRP satisfies the elements of the Howey investment contract test under the federal securities laws, and seeks to demonstrate how Larsen and Garlinghouse participated in the on-going sales efforts.
In addition to disgorgement of all “ill-gotten gains,” the requested order would permanently ban the named defendants from ever selling unregistered XRP or participating in any way in the sale of unregistered, non-exempt securities. It would also prohibit them from participating in the offering of any digital asset securities, and it seeks unspecified civil monetary penalties.
A Brief History Of Ripple And XRP
The idea behind the current XRP dates back to late 2011 or early 2012, before the company changed its name to Ripple. The XRP Ledger, or software code, operates as a peer-to-peer database, spread across a network of computers that records data about transactions, among other things. In order to achieve consensus, each server on the network evaluates proposed transactions from a subset of nodes it trusts not to defraud it.
Those trusted nodes are known as the server’s unique node list, or UNL. Although each server defines its own trusted nodes, the XRP Ledger requires a high degree of overlap between the trusted nodes chosen by each server. To facilitate this overlap, Ripple publishes a proposed UNL.
Upon the completion of the XRP Ledger in December 2012, and as its code was being deployed to the servers that would run it, a fixed supply of 100 billion XRP was set and created at little cost. Of those XRP, 80 billion were transferred to Ripple and the remaining 20 billion XRP went to a group of founders, including Larsen. At this point in time, Ripple and its founders controlled 100% of XRP.
Note that these choices represent a compromise between the fully decentralized, peer-to-peer network that was envisioned when Bitcoin (BTC) was first announced and a fully centralized network with a single trusted intermediary such as a conventional financial institution. In addition, Bitcoin was never designed or intended to be held or controlled by a single entity.
In contrast, all XRP was originally issued to the company that created it and that company’s founders. This hybrid approach to a blockchain-based digital asset and more conventional assets created and controlled by a single entity led some crypto enthusiasts to complain that XRP was not a “true” cryptocurrency at all.
According to the SEC’s complaint, from 2013 through 2014, Ripple and Larsen made efforts to create a market for XRP by having Ripple distribute approximately 12.5 billion XRP through bounty programs that paid programmers compensation for reporting problems in the XRP Ledger’s code.
As part of these calculated steps, Ripple distributed small amounts of XRP — typically between 100 and 1,000 XRP per transaction — to anonymous developers and others to establish a trading market for XRP.
Ripple then began more systematic efforts to increase speculative demand and trading volume for XRP. Starting in at least 2015, Ripple decided that it would seek to make XRP a “universal [digital] asset” for banks and other financial institutions to effect money transfers.
According to the SEC, this meant that Ripple needed to create an active, liquid XRP secondary trading market. It, therefore, expanded its efforts to develop a use for XRP while increasing sales of XRP into the market.
At about this time, Ripple Labs, and its subsidiary, XRP II LLC, came under investigation by the U.S. Financial Crimes Enforcement Network, or FinCEN, acting pursuant to its mandates in the Bank Secrecy Act, or BSA. Acting in conjunction with the U.S.
Attorney’s Office for the Northern District of California, the two companies were charged with failing to comply with various BSA requirements, including failure to register with FinCEN and failure to implement and maintain proper Anti-Money Laundering and Know Your Customer protocols. According to FinCEN, Ripple’s failure to comply with these FinCEN requirements was facilitating the use of XRP by money launderers and terrorists.
This action did not proceed to trial, with Ripple Labs settling the charges by agreeing to pay a $700,000 fine and further agreeing to take immediate remedial steps to bring the companies into compliance with BSA requirements. The settlement was announced by FinCEN on May 5, 2015. The major contention of FinCEN throughout its investigation was that XRP was a digital currency. Ripple acceded to this position and has since worked to comply with BSA requirements.
At the same time, as noted in the SEC’s complaint, from 2014 through the third quarter of 2020, the company sold at least 8.8 billion XRP in the market and institutional sales, raising approximately $1.38 billion to fund its operations. In addition, the complaint asserts that from 2015 through at least March 2020, while Larsen was an affiliate of Ripple as its CEO and later chairman of the board, Larsen and his wife sold over 1.7 billion XRP to public investors in the market.
Larsen and his wife netted at least $450 million from those sales. From April 2017 through December 2019, while an affiliate of Ripple as CEO, Garlinghouse sold over 321 million XRP he had received from Ripple to public investors in the market, generating approximately $150 million from those sales.
XRP Is Not Like Bitcoin Or Ether
The preceding description paints a picture of a digital asset that is widely held by persons scattered around the globe. In the case of both Bitcoin and Ether (ETH), this kind of decentralization was apparently enough to convince the SEC that those two digital assets should not be regulated as securities.
As Director Bill Hinman of the SEC’s Division of Corporation Finance explained in June of 2018:
“If the network on which the token or coin is to function is sufficiently decentralized — where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts — the assets may not represent an investment contract. Moreover, when the efforts of the third party are no longer a key factor for determining the enterprise’s success, material information asymmetries recede.
As a network becomes truly decentralized, the ability to identify an issuer or promoter to make the requisite disclosures becomes difficult, and less meaningful. […] The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value.”
This kind of analysis does not really work for XRP, most of which continues to be owned by the company that created it, where the company continues to have significant influence over which nodes will serve as trusted validators for transactions, and where the company continues to play a significant role in the profitability and viability of the asset. Part of that role will now, of course, involve responding to this latest SEC initiative.
The Court’s Probable Reaction
Unfortunately for Ripple and its former and current CEOs, the SEC has a strong case that XRP fits within the Howey investment contract test.
Derived from the 1946 Supreme Court decision in SEC v. W. J. Howey, this test holds that you have bought a security if you: (1) make an investment (2) of money or something else of value, (3) in a common enterprise, (4) with the expectation of profits, (5) from the essential managerial efforts of others.
Most of the purchasers of XRP, or certainly a very large number of them, would appear to fit within each of these categories.
Ripple raised more than $1.38 billion from the sale of XRP, so it is abundantly clear that purchasers were paying something of value. Moreover, as there was no effort to limit purchasers to the amount of XRP that they might reasonably “use” for anything other than investment purposes, that element appears likely to be present as well.
The fact that the fortunes of all the investors rise and fall together along with the value of XRP in the marketplace should satisfy the commonality requirement.
The complaint highlights a number of things that Ripple has done to promote profitability, including statements that it has made, all of which suggest that a reason for purchasing XRP is the potential for appreciation.
The limited functionality of XRP in comparison to its trading supply is another reason to believe that most purchasers were buying for investment, seeking to make a profit.
Finally, the significant on-going involvement and role of the company, especially given its huge continuing ownership interest in XRP, means that there is a strong case to be made that the profitability of XRP is highly dependent on the efforts of Ripple. All of this points to the reality that, under the Howey Test, XRP is likely to be a security.
Ripple’s Response To The SEC’S Action
Ripple’s response to the SEC’s enforcement action came even before the SEC’s complaint was officially filed. On Dec. 21, Garlinghouse tweeted out a condemnation of the SEC’s planned action, criticizing the agency for picking favorites and trying to “limit US innovation in the crypto industry to BTC and ETH.”
Soon after, Ripple’s general counsel, Stuart Alderoty, gave a strong indication of how the company was likely to respond in the pending matter by pointing out the 2015 FinCEN issue, which he claimed was a government determination that XRP was a digital currency rather than a security under the Howey Test.
Unfortunately, classification as a digital currency does not necessarily preclude regulation as a security.
As another New York district court decided in the 2018 case of CFTC v. McDonnell, in the context of the Commodity Futures Trading Commission’s authority to regulate digital assets, “Federal agencies may have concurrent or overlapping jurisdiction over a particular issue or area.”
Thus, even though FinCEN regulates crypto as a digital asset, the CFTC may treat it as a commodity; the SEC may regulate it as a security; and the Internal Revenue Service may tax it as property. All at the same time.
This comment should not be taken as approval of the SEC’s current approach and relative hostility to crypto offerings. As the SEC’s complaint notes, the XRP sales that are now being questioned took place over many years.
The initial sales date back to 2013, which had happened considerably before the SEC first publicly announced its position that digital assets should be regulated as securities if they fit within the Howey investment contract analysis, which did not come until 2017 with The DAO Report.
Moreover, since 2015, Ripple has been proceeding in accordance with the settlement reached with FinCEN. Since that time, Ripple has worked to bring its operations into compliance with BSA requirements, operating as if XRP is a currency rather than a security.
XRP Is A Crypto Asset In Japan, Not A Security, Ripple Partner SBI Claims
Not everyone is turning their backs on XRP, the embattled asset associated with San Francisco-based Ripple Labs.
* Japan-based financial services company SBI Holdings released a statement Monday saying under Japanese law XRP is a “cryptocurrency asset.”
* The statement arrives after the U.S. Securities and Exchange Commission last week sued Ripple Labs claiming it made a $1.3 billion profit selling XRP to retail investors while failing to register the cryptocurrency as a security in the U.S.
* SBI referenced a research article by Sadakazu Osaki of the Nomura Research Institute indicating under Japanese law XRP is a “cryptocurrency asset” and it is not a security in Japan.
* CoinDesk reported in October Ripple intended to invest in SBI’s MoneyTap blockchain-based payments subsidiary, which planned to used the RippleNet technology to lower Japanese transfer costs.
* Many cryptocurrency companies are backing away from XRP around the world, including Bitwise in the United States, Bitstamp in Europe and Hong Kong trading platform OSL.
* “SBI is putting lipstick on a pig to try and minimize the damage to its reputation in Japan from the Ripple lawsuit,” said Joel Edgerton, chief operating officer of BitFlyer USA, a cryptocurrency exchange that also has a strong presence in Japan. “SBI is an aggressive player in the Japanese financial industry and it is working to buy the pieces required to make it a leader in Japanese crypto,” Edgerton added. “However, it has many other regulated businesses that will not want any negative reputation impact.”
Coinbase Announces It Will Suspend XRP Trading As Price Drops Another 10%
Coinbase plans to suspend trading for the token on Jan. 19 but added it “may be halted earlier as needed.”
Major cryptocurrency exchange Coinbase will suspend trading for XRP in response to the United States Securities and Exchange Commission taking legal action against Ripple.
According to a blog post published today by Coinbase chief legal officer Paul Grewal, the exchange will fully suspend XRP trading starting on Jan. 19 at 10:00 am PST. Coinbase clarified that “trading may be halted earlier as needed” to maintain the exchange’s market health metrics. In addition, the suspension will reportedly not affect Ripple-backed Flare Network’s upcoming Spark (FLR) token airdrop.
“The trading suspension will not affect customers’ access to XRP wallets which will remain available for deposit and withdraw functionality after the trading suspension,” said Grewal. “We will continue to support XRP on Coinbase Custody and Coinbase Wallet.”
The U.S.-based exchange is the largest so far to take a position on XRP following the Dec. 22 announcement that the SEC will charge Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen with conducting an “unregistered, ongoing digital asset securities offering.”
Earlier today, crypto exchange OKCoin announced that it will suspend XRP trading and deposits beginning on Jan. 4. Bitstamp stated it will halt XRP trading for U.S. residents, while smaller exchanges including OSL, Beaxy and CrossTower announced they will take similar actions against trading the token.
Some crypto users are anticipating other exchanges falling in line like dominoes to delist or suspend trading of XRP now that a major player like Coinbase has taken a position on the token.
“You will soon see Kraken, Bittrex, Genesis, Grayscale and other members of the Crypto Rating Council delist it too,” said Twitter user PratikKala. “Liquidity will dry up and the remaining market makers in Asia will have to exit it too.”
Grayscale Investments may have already have distanced itself from XRP. According to Twitter user “ShardiB2,” the firm is reportedly ending subscriptions for its XRP Trust by announcing it would no longer accept new subscriptions or process pending ones. The Grayscale website declares that “The Grayscale XRP Trust private placement is currently closed.”
Following the Coinbase announcement, the price of XRP immediately dropped more than 10%, falling from $0.28 to $0.25 at the time of publication. This is the latest in a series of bearish movements for the token, the price of which has fallen 44% since the SEC announcement.
OKCoin Latest Exchange To Suspend XRP Trading And Deposits
The crypto exchange said the situation between Ripple and the SEC “will take time to reach a resolution.”
Crypto exchange OKCoin announced it would suspend XRP trading and deposits following the news that the United States Securities and Exchange Commission would be pursuing legal action against Ripple.
In a blog post released today, OKCoin said its “best course of action” in response to the recent SEC lawsuit would be to suspend trading and deposits of XRP. The exchange wrote that the suspension would take place over two days. Users who borrowed XRP/USD through OKCoin “are required to return the borrowed value” before Jan. 3. The following day, the exchange will suspend spot trading, margin trading and deposits for XRP.
“It is likely that this situation will take time to reach a resolution,” said the OKCoin blog post. “We will proactively inform our customers when we have information that may change our position.”
OKCoin’s position comes following the SEC unveiling charges against Ripple as well as CEO Brad Garlinghouse and co-founder Chris Larsen on Dec. 22. The commission alleges that the firm and its executives engaged in an “unregistered, ongoing digital asset securities offering” to investors since 2013 through sales of the XRP token. Garlinghouse responded by saying the SEC “voted to attack crypto” and was doing “the opposite of ‘fostering innovation'” in the United States.
Since news of the SEC charges broke, the price of XRP has fallen more than 36% as some exchanges have announced they will halt trading for the token, including OSL, Beaxy and CrossTower. Digital asset exchange Bitstamp is also planning to suspend XRP trading, but only for users based in the United States. However, suspending XRP on OKCoin — ranked at number 29, according to CoinMarketCap — may be a precursor for large exchanges to follow.
At the time of publication, the price of XRP was $0.28, having fallen 3.5% in the last 24 hours.
XRP Price Faces A Rocky Road To Recovery Ahead Of SEC’s Ripple Lawsuit
Though Ripple CEO Brad Garlinghouse is prepared to challenge the SEC over its lawsuit, the knock may be hard to come back from.
Just over a month ago on Nov. 24, XRP’s value surged to above the $0.90 mark on U.S. cryptocurrency exchange Coinbase, albeit momentarily, leading many backers to believe that the digital currency was all set to skyrocket once again, possibly even retesting its January 2018 all-time high of over $3.
However, in the wake of the recent lawsuit laid out by the United States Securities and Exchange Commission against Ripple, not only does a future value hike look increasingly improbable for XRP but the project’s future as a whole could be in jeopardy.
The SEC’s core argument against the digital currency created by Ripple is that from the very beginning, it has been a “security” and, as such, should have been registered with the governmental body before being made available for purchase for American citizens.
Furthermore, the SEC has claimed that Ripple, CEO Brad Garlinghouse and executive chairman Chris Larsen are in the wrong because they were able to acquire over $1.38 billion from the sales of the XRP token. In the wake of these allegations, the now fourth-largest crypto by market capitalization crashed by 24% in just 24 hours.
And while XRP did experience a small window of relief on Dec 25, rising by around 40%, the SEC’s announcement has led to many major crypto exchanges delisting or freezing the token.
Initially, it was only platforms such as OSL, Beaxy and CrossTower that temporarily stopped trading or removed XRP from their platforms, but more recently, the U.S.-based trading platform BitStamp announced via Twitter that it was going to prohibit customers from trading and depositing XRP starting January 2021. Ben Zhou, CEO of cryptocurrency exchange ByBit, told Cointelegraph:
“SEC and Ripple will have their day in court with due process of law, so we shall not prejudge the case in the court of public opinion. It is of course likely that the case will take up much of Ripple’s attention and resources. […] We hope a clear precedent and framework emerge from these proceedings.”
The Nitty-Gritty Of The Case
In its complaint, the SEC has laid out a fairly straightforward argument stating that XRP was never registered with the body and that Ripple’s executive brass did not make any attempts to pursue an exemption from registration.
Thus, from the commission’s point of view, this amounts to a sustained practice of illegal sales of unregistered, nonexempt securities under Section 5 of the Securities Act of 1933.
However, what seems unusual to some is that the case has been brought forward in a New York federal court even though Ripple’s headquarters are in California. The simple reason for this is that Ripple has one of its offices situated in the Southern District of New York and some of the statements issued publicly by Garlinghouse regarding XRP were made within the state.
Not only that, a substantial number of XRP tokens were sold to New York residents, which in legal terms makes it absolutely fine for the lawsuit to be tried in a New York court of law.
Also, the lawsuit names Larsen and Garlinghouse personally — so as to recover any money obtained by them via their various fundraising efforts — even though the initial XRP was sold by Ripple’s wholly owned subsidiary XRP II LLC.
In this regard, the SEC claims that both individuals sold significant volumes of XRP illegally — 1.7 billion XRP by Larsen and 321 million XRP by Garlinghouse — even contending that they “aided and abetted” Ripple in its unethical sales practices.
Providing his thoughts on the matter, Todd Crosland, CEO of cryptocurrency exchange CoinZoom, stated that the lawsuit casts a large shadow over the price of XRP, claiming that it will be interesting to see how things play out as “Lack of institutional support will hurt liquidity,” adding: “Institutions will not bet against the SEC, and will be unloading their positions and will avoid taking new positions in XRP until the lawsuit is resolved.”
What Are The Implications Of The Lawsuit?
If the SEC succeeds in its prosecution efforts, Ripple will be framed as the primary violator, with both Larsen and Garlinghouse facing serious legal implications, as both are alleged to have participated in the pattern of XRP sales.
Technically speaking, the SEC’s issues with XRP stem from the fact that the digital currency satisfies key elements of the Howey test under federal securities laws, thus leading to the question of how exactly Garlinghouse and Larsen were able to take part in the token’s various sales efforts.
The commission is now seeking to not only obtain all of Ripple’s ill-gotten gains but is also looking to permanently ban the named defendants from ever selling unregistered XRP or participating in the sale of unregistered, nonexempt securities. Not only that, but the SEC is also seeking an unspecified civil monetary penalty, the exact amount of which has not been made public.
A Twist In The Tale?
The ongoing XRP saga comes at a time when SEC Chairman Jay Clayton has submitted his resignation, with his duties being taken over by Elad Roisman, who has been appointed acting chairman of the U.S. financial regulator.
Also, in a recent letter sent to Clayton, Joseph Grundfest — a former SEC commissioner — was allegedly quoted as saying that while the Ripple lawsuit is an “unprecedented” event, “no pressing reason compels immediate enforcement action.” He added: “Simply initiating the action will impose substantial harm on innocent holders of XRP, regardless of the ultimate resolution.”
In the midst of all the aforementioned events, Garlinghouse has continuously reiterated that he will “aggressively fight” in court the SEC’s allegedly unwarranted actions against Ripple and will rest only after the case has been proven to be entirely untrue. Furthermore, he also emphasized that even though he had the option of settling with the SEC, he has decided to not take the easy way out.
It now remains to be seen what fate, or the American judicial system, has in store for Ripple. As of publication, XRP is trading at $0.29, with the asset showcasing a seven-day decline of nearly 50%.
Ripple Vows To Respond To SEC ‘Attack’ Amid Exchange Delistings Of XRP
Ripple issued a statement on Tuesday urging market participants to hear its side of the story amid the ongoing SEC saga.
With XRP plunging in value following a wave of exchange delistings and trading suspensions, Ripple Labs issued a statement Tuesday vowing to respond to the United States Securities and Exchange Commission’s allegations against the company.
The Statement Opens With The Following Message:
“The public and press have only heard the story from the SEC’s side, and we’ll be filing our response in a few weeks to address these unproven allegations against Ripple.”
The statement claims that the SEC is using Ripple to bring down the entire cryptocurrency industry in the United States and that, for years, the company has sought regulatory clarity on digital assets to no avail.
Some observers believe Coinbase’s decision to suspend XRP in January could be the death knell for the digital asset as Ripple embarks on multi-year litigation with the SEC. Coinbase announced its plans to suspend XRP trading on Monday – a move that was hardly surprising given the exchange’s IPO aspirations.
XRP has been in freefall ever since the SEC filed a lawsuit against Ripple for allegedly violating securities laws. This prompted several exchanges to delist XRP to avoid regulatory backlash. Ripple says the lawsuit “has already affected countless innocent XRP retail holders with no connection to Ripple.”
In the meantime, Ripple will continue to operate and support all its products outside the U.S. The statement explained:
“The majority of our customers aren’t in the U.S. and overall XRP volume is largely traded outside of the U.S. There are clear rules of the road for using XRP in the UK, Japan, Switzerland and Singapore, for example.”
As Cointelegraph previously reported, Ripple CEO Brad Garlinghouse believes his company will still succeed regardless of how the SEC chooses to classify XRP. That’s because more than 90% of RippleNet users are outside the country.
Few within the crypto industry have defended Ripple against the SEC’s allegations. Coin Center, a D.C.-based think tank and champion for cryptocurrency adoption, says it isn’t prepared to argue that XRP is not a security.
[NOTICE] XRP Delisting From The Crypto.com App
Dear Valued Customer,
Effective January 19, 2021 at 10am UTC (5am EST), XRP will be delisted and trading suspended from the Crypto.com App in the U.S. Below please find how the delisting of XRP will be handled across Crypto.com’s products:
Deposit And Withdrawal
U.S. based customers won’t be able to deposit XRP into the Crypto.com App as of January 19th, 10am UTC (5am EST). Withdrawal of XRP from the Crypto.com App will not be affected.
U.S. based customers with XRP Earn deposits will have their XRP unlocked and moved to their Crypto Wallet on December 29th, 2020, 10am UTC (5am EST); interest will be paid up until this date.
If you have any questions, please reach out to us via the in-app chat. We’re here to help.
The Crypto.com Team
How Low Can XRP Go? Watch These Price Levels Next
XRP price hit new monthly lows after Coinbase revealed it will delist the token in January.
XRP price dropped by 30% on Dec. 29 following Coinbase’s decision to suspend trading.
The market sentiment around XRP has become overwhelmingly negative due to the fear of more exchange delistings.
In the near term, XRP faces three key historical support levels at $0.224, $0.1743 and $0.1471.
Where Will The XRP Price Go Next?
The ongoing price trend of XRP is not cyclical nor reliant on technical analysis. It is due to investors selling XRP following the suspension of trading across major cryptocurrency exchanges.
On Dec. 29, Coinbase announced that it is suspending the XRP trading pairs on their platform. Paul Grewal, the chief legal officer at Coinbase, wrote:
“In light of the SEC’s lawsuit against Ripple Labs, Inc, we have made the decision to suspend the XRP trading pairs on our platform. Trading will move into limit only starting December 28, 2020 at 2:30 PM PST, and will be fully suspended on Tuesday, January 19, 2021 at 10 a.m. Pacific Standard Time*. We will provide additional updates, if any, through the Coinbase Support Twitter account, including if there are any changes to timing.”
As Cointelegraph previously reported, analysts anticipated Coinbase to suspend XRP trading after the United States Securities and Exchange Commission filed its complaint.
Coinbase plans to undergo an initial public offering, and it is in the firm’s best interest to remain fully compliant with the regulators in the U.S.
Considering the regulatory uncertainty around XRP, traders have emphasized that technical analysis is of less importance in the short term. Scott Melker, a cryptocurrency trader, said:
“A few people have told me that there’s oversold bullish divergence on the $XRP chart. You are doing it wrong. Charts don’t matter here. You cannot trade in a vacuum. Jesus could come down with Biggie and Tupac and put on a concert for Brad Garlinghouse and I still wouldn’t buy.”
In the foreseeable future, XRP has several major support areas it could potentially recover from. However, these are deep support levels on the weekly chart, which shows that it lacks momentum for a major rebound.
The XRP price has fallen by over 60% in merely two weeks, recording one of its steepest two-week drops in history.
What happens next?
Adam Cochran, a partner at Cinneamhain Ventures, was one of the first to break the story that Coinbase had conversations about suspending XRP trading.
Cochran hinted that the SEC are probably looking into more projects and companies than people realize. He said:
“If you thought my scoop on Coinbase delisting/suspending $XRP was insightful, you’re going to love the next scoop I’m working on, this week. Looks like that SEC is far more active than we thought and sniffing around a number of projects and companies!”
XRP The ‘Third Largest Collapse of All Time’ Says The TIE’s Josh Frank
The token has lost more value than former commodities trading giant Enron.
The XRP token’s market capitalization has fallen almost $130 billion since its all-time high in 2018, making the cryptocurrency project’s decline comparable to the collapse of major financial institutions.
According to Josh Frank of crypto-focused research company The TIE, the project is experiencing a collapse similar to some of the biggest corporate scandals and catastrophes in recent history.
At its peak, XRP’s market capitalization was roughly $140 billion in January 2018. It has recently slipped under $10 billion, an estimated loss of $130 billion in under three years. This effectively makes the “collapse” of XRP third behind only the $327 billion bankruptcy of Washington Mutual and the failure of investment giant Lehman Brothers — a financial meltdown valued at $691 billion — in 2008.
“It is sad and unfortunate that the biggest losers in the [XRP] saga are the individual investors who lost unimaginable amounts of money,” Frank told Cointelegraph. “The founders of Ripple continued to dump their tokens for years and made hundreds of millions of dollars.”
Following the news that the U.S. Securities and Exchange Commissions would charge Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen with conducting an “unregistered, ongoing digital asset securities offering” for their XRP sales, the token price has dropped precipitousl. Crypto exchanges including Coinbase, Bittrex, OKCoin, Bitstamp, OSL, Beaxy, and CrossTower later announced they would suspend trading for XRP or delist the token entirely, providing additional bearish fuel.
Institutional players have also started distancing themselves from XRP. Grayscale Investments’ website now states that its “XRP Trust private placement is currently closed” with one Twitter user claiming the firm would also no longer process pending applications for the XRP Trust.
At the time of publication, the price of XRP is $0.21, having fallen more than 65% in the last 30 days.
Grayscale Reportedly Dumps Massive Stakes In XRP, XLM
The digital asset manager has reduced its holdings of both cryptocurrencies significantly.
Grayscale Investments, the world’s largest digital asset manager, has reportedly dumped a significant portion of its XRP and XLM holdings.
Data from Bybt, a cryptocurrency futures trading platform, reveal that Grayscale’s XRP holdings declined by more than 9.18 million on Dec. 29, bringing its total position to 26.45 million XRP, worth $5.77 million at press time.
On the same day, Grayscale reportedly liquidated over 9.74 million Stellar Lumens, or XLM, bringing its total holdings to 9.19 million XLM, or $1.27 million at today’s prices.
Grayscale’s assets under management currently sit at $19.26 billion, with Bitcoin (BTC) making up 87% of the total.
Grayscale’s apparent firesale of XRP came a week after the U.S. Securities and Exchange Commission, or SEC, filed a lawsuit against Ripple Labs. The news triggered a wave of delistings from major exchanges, including Coinbase and Bittrex, as XRP’s price plunged 60%.
Ripple has vowed to fight back against the SEC’s charges and has urged market participants not to reach any conclusions about XRP’s alleged security status until they hear its side of the story.
With all the regulatory scrutiny surrounding Ripple, it’s not difficult to see why Grayscale may be distancing itself from the cryptocurrency. It isn’t entirely clear, however, why the fund manager reduced its exposure to XLM at the same time.
The moves could be a temporary reallocation strategy, as evidenced by recent data showing that Grayscale actually increased its position in XRP and XLM following their recent price dumps.
Stellar was co-founded by Jed McCaleb, a software developer who was part of Ripple’s founding team before departing the project in 2014. As of Dec. 9, McCaleb’s public XRP wallet held over 251 million XRP. He has reportedly sold hundreds of millions of dollars worth of XRP since early 2016.
SEC Lawsuit Against Ripple Set For Virtual Pretrial Conference In February
The SEC’s case against Ripple for selling XRP as an unlicensed security will begin with a pretrial in February 2021.
The United States District Court of the Southern District of New York has fixed Feb. 22, 2021 as the date for the pretrial of the lawsuit filed by the Securities and Exchange Commission against Ripple Labs and its principal actors.
According to a court document filed on Tuesday, counsel representing all parties on the matter will hold a telephone pretrial conference. As part of preparations for the preliminary hearing, the parties in the case will submit a joint letter a week before the pretrial date addressing:
“(1) a brief description of the case, including the factual and legal basis for the claim(s) and defense(s), (2) any contemplated motions and (3) the prospect for settlement.”
Earlier in December, the SEC filed a lawsuit against Ripple, accusing the blockchain firm of selling XRP tokens in violation of securities law. The legal status of XRP as a commodity or a security has long been the subject of debate within and outside the crypto space.
Several cryptocurrency exchanges have reacted to the lawsuit by either suspending XRP trading or delisting the token from their platforms altogether. Investment firms like Bitwise Asset Management have also liquidated their XRP holdings in the wake of the SEC enforcement action.
As previously reported by Cointelegraph, Ripple partner MoneyGram distanced itself from the company, asserting that it does not utilize RippleNet. The XRP price has also declined significantly, down over 65% in December.
In a statement issued earlier in the week, Ripple accused the SEC of harming XRP token holders. Ripple also declared its intention to respond to the Commission’s claims against the company.
Bittrex Joins Coinbase In Delisting Ripple’s XRP Following SEC Lawsuit
Major exchanges scramble to disassociate themselves with XRP as Ripple tries to regain control of the narrative.
Cryptocurrency exchange Bittrex announced on Dec. 29 that it will be removing all XRP markets starting from Jan. 15, 2021. Trading pairs affected are BTC/XRP, ETH/XRP, USDT/XRP and USD/XRP.
The announcement comes just days after fellow exchange Coinbase said that it would suspend trading in XRP from Jan. 19.
XRP’s fortunes have taken a significant downturn since the United States Securities and Exchange Commission unveiled a lawsuit against XRP issuer Ripple last week.
The lawsuit alleges that Ripple, along with CEO Brad Garlinghouse and co-founder Chris Larsen, have raised more than $1.3 billion through what it claims is an unregistered, ongoing securities sale of XRP.
Ripple hit back yesterday, claiming that the SEC’s “attack” on Ripple is an attempt to bring down the entire U.S. crypto industry.
While denying that XRP is indeed a security as the SEC claims, it also noted that the majority of XRP customers reside outside of the U.S. and that it would continue to operate and support its products in the rest of the world.
However, this seems to have done little to reassure investors, as XRP price dropped another 10% in the past 24 hours to $0.20.
XRP had been riding high prior to the announcement of the SEC lawsuit, hitting a yearly high of $0.67 in late November.
With 70% of that value now wiped out, analysts are wondering whether this lawsuit could be a final death-knell for XRP.
Coinbase Sued For Allowing The Sale Of XRP
In an interesting consequence of Ripple Labs’ battle with the U.S. Securities and Exchange Commission, a Missouri man claiming to be a Coinbase client is suing the crypto exchange for selling the XRP token.
In a complaint filed in the Northern District Court of California, Thomas C. Sandoval, the St. Louis County-based plaintiff, alleges Coinbase knowingly sold XRP as an unregistered security and gained commission on these sales.
The lawsuit, which seeks class action status, argues Coinbase violated California’s unfair competition laws by “[gaining] an unwarranted competitive advantage over digital asset exchanges that only sold commodities.”
“Coinbase sold a token called Ripple (hereafter referred to by its trading symbol: XRP), the value of which was entirely linked to the success or failure of Ripple Labs, Inc. (Ripple Co.) the company that created the token, and the managerial efforts of Ripple Co. executives. Investors in XRP, such as Plaintiff, reposed an expectation of profit in such managerial efforts by Ripple Co. executives and purchased the token in order to make money on their investment,” the complaint reads.
The SEC filed suit against Ripple Labs last week, claiming XRP is a security Ripple has been selling for seven years without registering it or seeking an exemption, raising $1.3 billion in the process. As a result of the SEC action against Ripple, Coinbase said Monday it would be suspending trading in XRP as of Jan. 19.
The lawsuit against Coinbase seeks unspecified compensatory damages, attorneys’ fees and other relief.
Anderson Kill partner Stephen Palley told CoinDesk he sees “a couple of issues” with this lawsuit. He said its allegations of fraud regarding unfair competition laws rests “on ‘information and belief,’ which is the legal equivalent of ‘I think so but am not really sure’,” Palley wrote in an email.
He added that Coinbase has “a pretty good record” of backing itself up in legal matters involving clients through the arbitration clause in its terms of service.
In the grand scheme of things, he concluded, Coinbase has more than client lawsuits to worry about with the SEC breathing down Ripple’s neck.
“This is going to be hard fought in motion practice and will likely end up in private arbitration unless the court finds that a fairly narrow public policy exception applies,” he said about the Coinbase lawsuit. “I’d assess the risk here to Coinbase (and other exchanges) as quite a bit less than that from continuing to list an asset the SEC has targeted and face much more dangerous enforcement action risk.”
Binance US Says It Will Delist XRP On Jan. 13
Cryptocurrency exchange Binance is suspending XRP trading for its customers effective next month.
The exchange announced Wednesday that U.S. customers will not be able to deposit or trade XRP (+6.91%) on the platform effective 10:00 a.m. ET on Jan. 13, 2021, though withdrawals remain unaffected at this time.
Binance is the latest crypto trading venue to suspend XRP support in the U.S. after the Securities and Exchange Commission (SEC) sued Ripple earlier this month on allegations it has been selling XRP as an unregistered security for over seven years. After the news broke, the price of XRP dipped 2.1% to a 24-hour low of $0.199910 but is slowly recovering.
Other Exchanges To Delist Or Suspend XRP Trading Or Markets Include:
* Swipe Wallet
* Jump Trading
* Galaxy Digital
Most of these platforms have only removed XRP from their U.S. markets or platforms, though a few have suspended support internationally.
According to the SEC suit, which was filed last week in the U.S. District Court for the Southern District of New York, Ripple, CEO Brad Garlinghouse and Chairman Chris Larsen have sold some $1.3 billion in XRP since 2013. The SEC alleges that Ripple did not register XRP as a security or seek an exemption for the token, of which it holds nearly 50 billion in escrow.
For its part, Ripple has called the allegations “unproven,” and has promised to file a response in court in the coming weeks. The San Francisco-based firm has repeatedly called the SEC’s suit an “attack on crypto” in the U.S., with CEO Garlinghouse claiming the agency’s actions “directly benefit China.”
A pretrial conference has been scheduled for Feb. 22, 2021, according to public court records, with the parties required to submit a joint letter describing the case and the arguments each side plans to make, potential motions and any potential settlement details the week before.
The SEC and Ripple must also file a joint letter by Feb. 15 stating whether both parties are willing to consent to having a magistrate judge oversee proceedings (rather than a district judge).
Genesis To Suspend XRP Trading, Lending
Digital currency prime broker Genesis is halting XRP trading and lending in light of the Securities and Exchange Commission’s lawsuit against Ripple.
According to an email sent to clients and shared with CoinDesk, the firm, which is owned by CoinDesk parent company Digital Currency Group, is suspending XRP (+4.08%) trading and lending.
Clients will have until Jan. 15 to sell XRP “as long as sufficient liquidity exists,” the email read, after which time Genesis will suspend trading and deposits in the token, although withdrawals will still be allowed.
Ripple’s regulatory trouble is apparently driving the decision. The SEC is suing Ripple for what it’s calling a $1.3 billion unregistered security sale. Genesis’ “team is actively monitoring the evolving regulatory situation with XRP,” the email read.
For its XRP lending markets, the email said Genesis is calling all loans and that all fixed-term loans that mature on or after Feb. 1, 2021, have been called back or terminated.
Genesis’s XRP derivatives markets will continue trading.
The announcement makes Genesis the latest in a host of crypto exchanges suspending XRP trading until the outcome of the lawsuit becomes clear.
Cryptocurrency XRP Is In Free Fall With Exchanges Delisting Coin
XRP continued its plunge after Coinbase became the latest U.S. crypto exchange to remove the world’s fourth-biggest coin in the wake of an SEC lawsuit against Ripple Labs Inc.
XRP tumbled 37% Tuesday, bringing its drop to 60% in the week since securities regulators accused Ripple of issuing more than $1 billion in unregistered tokens. Coinbase said Tuesday that it will fully suspend trading XRP on Jan. 19, but will continue providing custodial services for clients.
Customers will find it increasingly difficult to trade XRP after the largest exchange joined Bitstamp in delisting the token.
Coinbase customers can move it to another exchange, but it is growing more likely that the regulatory challenge will lead other U.S.-based venues to follow suit. Last week, the Bitwise 10 Crypto Index Fund (ticker BITW) liquidated its position in XRP, which comprised 3.8% of its holdings.
“This is obviously bad for XRP across multiple dimensions: fewer potential buyers, and lower overall liquidity. For XRP to work as Ripple intends, XRP needs to be very liquid, so this particularly harmful,” said Kyle Samani, co-founder of Multicoin Capital.
The Securities and Exchange Commission said in last week’s suit that Ripple raised more than $1.4 billion through the sale of XRP without first registering it as a security with the agency, creating “an information vacuum” that mislead investors. San Fransisco-based Ripple has denied the allegations.
“The SEC has introduced more uncertainty into the market, actively harming the community they’re supposed to protect,” Ripple said in a statement on its website. “It’s no surprise that some market participants are reacting conservatively as a result. We’ll be filing our response in a few weeks to address these unproven allegations.”
US Exchanges Are Suspending Or Delisting XRP Left And Right
Binance.US and eToro are the latest exchanges to discontinue XRP trading in America as Ripple faces the SEC’s enforcement hammer.
Binance.US, the American branch of the global crypto exchange, and crypto-friendly asset trading service eToro are the latest platforms to suspend XRP trading in the United States.
Announcing the news on Thursday, eToro revealed that U.S. customers will not be able to trade XRP starting Jan. 3, 2021. Customers with existing trades at the time will have three weeks from that date to close all open positions, the platform added in its statement.
For Binance.US, the effective date of its XRP delisting is Jan. 13, 2021. However, the delisting will not affect the claim process for Flare’s Spark (FLR) token airdrop distribution event.
Binance.US and eToro now join the likes of Coinbase and Bittrex as major exchanges to halt XRP trading for American traders.
Coinbase is also the subject of a lawsuit from a disgruntled trader accusing the platform of knowingly selling XRP as an unlicensed security to its users.
These actions have come in the wake of the enforcement action by the Securities and Exchange Commission against Ripple. The SEC is suing Ripple for violating securities laws in its sale of XRP tokens.
Aside from exchanges delisting or suspending XRP trading, U.S.-based investment firms with XRP positions have also liquidated their holdings. Digital-asset manager Grayscale recently dumped about $5.77 million worth of XRP tokens following the SEC lawsuit. Earlier in December, Bitwise Asset Management sold off all its XRP, removing the token from its Bitwise 10 Crypto Index Fund.
Meanwhile, Ripple said it plans to fight back against the SEC’s accusations, urging investors not to accept the commission’s stance on the matter. A virtual pretrial has already been set for Feb. 2021.
EToro USA Becomes Latest Exchange To Suspend XRP Trading
The U.S. division of Israeli crypto exchange eToro is suspending XRP trading for its customers effective next month.
The exchange announced Thursday it would stop facilitating XRP (+6.2%) purchases or conversions for U.S. customers effective Jan. 3, though customers can still withdraw XRP from their eToro wallets to other unaffiliated addresses.
It’s the latest crypto trading venue to suspend XRP support in the U.S. after the Securities and Exchange Commission (SEC) sued Ripple earlier this month on allegations that it has been selling XRP as an unregistered security for over seven years.
Most of these platforms have only removed XRP from their U.S. markets or platforms, though a few have suspended support internationally.
Faulty Data? Grayscale Didn’t Liquidate Massive Amounts Of XRP And XLM
A Grayscale spokesperson confirmed to Cointelegraph that the fund manager didn’t dump massive stakes of XRP and XLM.
Bybt data apparently showing a massive liquidation of XRP and Stellar Lumen (XLM) by Grayscale Investments earlier this week is inaccurate, according to the investment company.
On Wednesday, a public Bybt data set suggested that Grayscale Investments reduced its exposure to XRP by roughly 9.19 million units and that the fund also cut its XLM holdings by over 9.74 million units. According to Bybt data, the net change in holdings occurred over 24 hours on Tuesday.
Cointelegraph accessed the data before Grayscale released its daily assets under management report for Tuesday and noted in an article that Grayscale had reportedly sold significant amounts of XRP and XLM.
Efforts to reach Grayscale on Wednesday were unsuccessful. However, on Thursday, a Grayscale spokesperson told Cointelegraph:
“None of the Grayscale investment products operate a redemption program. The net holdings of our investment products only change as a result of inflows from the private placement, price of the underlying assets and accrued management fee.”
“Statements about large sales of underlying assets by any of our investment products are false and inaccurate. Any perceived large decrease in the USD value of Grayscale XRP Trust would have been a result of a decrease in the USD price of XRP.”
Bybt’s data feed still shows a large outflow of XRP and XLM from Grayscale over the past seven days, both in terms of AUM and actual units of XRP and XLM held. These figures appeared under the “24H Change” column on Wednesday.
The Grayscale AUM report for Wednesday was released on Thursday.
XRP Enthusiasts Seek To Force White House’s Hand On SEC Suit
A longshot effort from the community hopes to solicit an official White House response.
As token prices plunge and Ripple prepares for court, a band of XRP enthusiasts have rallied around a petition that may force a White House statement on the recent SEC lawsuit alleging Ripple conducted an unregistered securities offering.
A petition filed on the White House-run We the People website titled “We the People ask the federal government to deem XRP, the virtual currency, a currency,” has now crossed 10,000 signatures.
Created by the Obama administration in 2011, We the People allows users to create petitions that, upon reaching 100,000 signatures within 30 days, will prompt an official White House response. While many of the petitions are serious, the platform has been home to more than one lark: one of the most famous petitions called for the construction of a Death Star.
The XRP petition, created by “J.W.”, calls for the SEC to “cease” its “frivolous” lawsuit, referencing a previous FinCEN determination that XRP is a currency. The petition also references XRP’s rapidly-deteriorating marketcap — a drawdown that TheTIE’s Joshua Frank has called the “third largest collapse of all-time” — as well as the “hundreds of thousands of ordinary Americans” who are “suffering irreparable harm and damages.”
The petition effort comes as Ripple prepares for a February pretrial conference, the first of what may prove to be a long and contentious legal process. Following the SEC’s filing a suit on December 22nd, the number of major exchanges who have delisted XRP continues to grow, and Ripple has released a statement encouraging investors and the press to wait to hear the company’s side of the story before coming to any conclusions.
As the legal process moves forward, petition signers find themselves with few options. Said one redditor:
“I feel like you could get a million signatures and it wouldn’t do a damn thing. That being said, I signed it.”
XRP Holders Ask Court To Stop The SEC From Calling Their Holdings Securities
XRP investors don’t want to have their holdings lumped in with Ripple’s.
Several investors in XRP have filed with a Rhode Island court, looking to change the course of the Securities and Exchange Commission’s case against Ripple.
In response to what it calls “the most significant SEC enforcement action in modern history,” the Friday filing is a petition for a “writ of mandamous.” A “mandamus” is effectively just an order that a public official — in this case, the chairman of the SEC — does their job. The filers are calling upon new Acting Chairman Elad Roisman to alter the course that his predecessor, Jay Clayton, set by beginning enforcement against Ripple just before his departure.
The petitioners argue that the SEC’s action operates in defiance of its statutory mandate to protect investors:
“Instead of protecting investors and sharing information to help investors make informed decisions, as required by the mission statement, the Respondent knowingly and intentionally caused multi-billion-dollar losses to innocent investors who have purchased, exchanged, received and/or acquired the Digital Asset XRP, including the named Petitioners, and all others similarly situated.”
Strangely, the XRP investors have filed their case in Rhode Island, while the Ripple case is happening in the Southern District of New York.
The SEC initially filed its case against Ripple on Dec. 22 following many months of investigation into Ripple’s longstanding sale of XRP, which began in 2013. The petition from investors takes issue with the SEC’s timeframe in filing this action and further looks to set up a contrast between Ripple’s XRP and that owned by investors:
“It’s not just legally wrong and intellectually dishonest, but it is absurd to call the XRP held by thousands of innocent investors, who have absolutely no connection to Ripple or its executives’ securities.”
The use of an apostrophe rather than a comma, while accidental, is in its own way telling.
The ultimate aim of the petition is to get the court to order the SEC “to amend its complaint against Ripple to exclude the claim that the XPR owned by Petitioners constitute securities.” Such a change, while no help to Ripple, would in theory allow the investors to go back to trading their holdings freely. Anyone holding any of XRP’s circulating supply knows that the SEC’s definition has wrecked their bottom line.
XRP’s value has collapsed since the SEC begin its enforcement. Many exchanges have announced that they are suspending or delisting XRP, which has led to a liquidity crisis for holders. This is despite Ripple founder Brad Garlinghouse’s assurances that the token would be fine in the event of such an action.
Uphold Will Not Delist XRP Before Court Decision
The payments processor and exchange is committing to only delist XRP if and when the lawsuit is resolved.
Cryptocurrency payments processor and exchange operator Uphold has formally clarified that it will not delist XRP for the time being.
As part of an announcement made on Monday, Uphold stated it will not be removing XRP from its crypto offerings until the lawsuit filed by the United States Securities and Exchange Commission is resolved.
“Uphold has decided to continue listing XRP until and unless the SEC’s Complaint is adjudicated in the SEC’s favour and XRP is judged to be a security today (or trading volume dissipates to a point where we can no longer support XRP).”
The exchange noted that the lawsuit against Ripple and its executives is an allegation, and no U.S. court of law formally deemed XRP a security. “We trust that other Exchanges will adopt a similar stance rather than rushing to judgement ahead of the Court’s decision,” the announcement reads.
The exchange has also questioned the SEC’s heavy-handed action against Ripple, which has sent the price of XRP on a powerful downward plunge. XRP lost more than 50% of its value since rumors about the enforcement began circulating, from about $0.57 to $0.23 as of press time.
The losses have been compounded significantly by a string of delisting announcements by major exchanges, first Bitstamp, then Coinbase, Binance.US and eToro. Major hedge funds and institutional service providers like Bitwise and Genesis Trading have likewise dropped support for the asset.
The delistings were largely seen as a precautionary measure to protect against regulatory risk. The lawsuit is still in its earliest stages, with a pre-trial virtual hearing scheduled for Feb. 22.
In the meantime, Ripple has vowed to defend itself against the SEC. Likewise, a host of community members are drumming up support through petitions and class-action motions.
Crypto-Friendly App Cautions Users To ‘Reassess’ XRP Holdings
Revolut warned users that their XRP funds could be stuck “in a worst-case scenario.”
Revolut, a crypto-friendly trading app, is reportedly issuing a strong warning to its customers regarding buying and selling XRP.
According to news outlet The Irish Times, the fintech firm recently sent out a notice to its customers saying it was still possible for the firm to delist or restrict trading on XRP with little or no notice. Revolut warned users that their funds could effectively be stuck without the means to sell tokens even if the price falls to zero “in a worst-case scenario.”
“It’s important that you constantly reassess your crypto holdings, specifically XRP, and whether you remain comfortable with the associated risks,” said Revolut.
Revolut users are limited to trading within the app and can’t send or receive crypto from third-party wallets. The firm said the recent charges from the United States Securities and Exchange Commission could cause liquidity on some of its partner crypto exchanges to drop as they delist the token, leaving Revolut unable to buy or sell XRP.
A number of crypto exchanges, including Coinbase, have announced they will suspend XRP trading starting this week in response to the SEC taking legal action against Ripple. The commission has charged Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen with conducting an “unregistered, ongoing digital asset securities offering” in selling XRP tokens.
Last year saw the United Kingdom-based money app expanded its crypto trading services to Australia and the United States, reportedly accelerated by growing interest in crypto during COVID-19-related lockdowns. Revolut users held roughly $120 million worth of crypto in 2019 despite the firm reporting massive losses the same year.
At the time of publication, the price of XRP is $0.23, having risen 2.6% in the last 24 hours.
Grayscale Dumps XRP: Here’s Where It’s Putting The Cash
Grayscale Investments is the latest major crypto player to drop its association with Ripple’s token.
Grayscale Investments, the world’s largest cryptocurrency asset manager, announced Tuesday that it has liquidated its XRP holdings and used the remaining funds to buy up more Bitcoin (BTC), Bitcoin Cash (BCH) and Litecoin (LTC).
The decision affects Grayscale’s Digital Large Cap Fund, a market-cap-weighted asset that provides exposure to the largest cryptocurrencies by market capitalization. The sale of XRP occurred on Monday, less than a week after Genesis Global Trading, the fund’s authorized participant, announced it would soon temporarily suspend XRP trading, likely in relation to the lawsuit filed by the United States Securities and Exchange Commission against Ripple.
Genesis Global Trading plans to halt all XRP transactions on Jan. 15.
Prior to the sale on Monday, XRP accounted for roughly 1.46% of the Digital Large Cap Fund. The fund’s components are now 81.63% BTC, 15.86% Ether (ETH), 1.08% BCH and 1.43% LTC. Each share represented 0.00047489 BTC, 0.00287011 ETH, 0.00047537 BCH and 0.00167314 LTC.
Grayscale also confirmed the fund’s new composition in a series of Twitter posts on Tuesday.
The fund manager said XRP was “removed following DLC Fund’s Quarterly Review (12/31/20).” It explained that no other asset qualified for inclusion in the fund.
Grayscale’s assets under management recently eclipsed $20 billion for the first time, highlighting broad institutional demand for Bitcoin and other digital assets. The asset manager is scooping up Bitcoin in greater quantities, with at least one metric showing Grayscale bought nearly three times more BTC than was mined in December.
Although XRP was among several large-cap cryptocurrencies to rally in recent months, its outlook remains uncertain following a wave of exchange delistings.
XRP Whales Are Sinking Fast
The number of XRP addresses holding at least 1 million tokens has declined sharply over the past two weeks.
Wallets holding oversized XRP positions are plunging quickly in the wake of the United States Securities and Exchange Commission’s lawsuit against Ripple. Industry data reveals just how quickly these so-called XRP whales are sinking.
Coin Metrics, a leading data provider on all things cryptocurrency and blockchain, estimated that the number of wallet addresses holding at least 1 million XRP has dropped to 1,567 from 1,721 between Dec. 21, 2020 and Jan. 3. In other words, it appears that XRP whales are liquidating a portion of their holdings amid regulatory uncertainty surrounding Ripple.
As the following chart from Coin Metrics illustrates, XRP’s 1 million token club had been rising consistently since early 2019 before plunging sharply in late December. Addresses holding at least 1 million XRP are at the lowest level since October 2019.
Holders of XRP have been rattled by the SEC’s accusations that Ripple violated regulations by selling $1.3 billion worth of unregistered securities. The lawsuit initiated by the securities regulator triggered a more than 70% drop in XRP price as exchanges and fund managers began to distance themselves from the project.
On Tuesday, Grayscale Investments announced that its Digital Large Cap Fund had been fully liquidated of its XRP holdings. Bitwise Asset Management removed XRP from its holdings before Christmas.
XRP is the only blemish on an otherwise rosy few weeks for the cryptocurrency market. Every coin in the top 15 crypto assets by market capitalization printed gains on Tuesday, with the exception of XRP, according to CoinMarketCap data.
What’s more, XRP is close to being overtaken by Litecoin (LTC) in the market cap rankings. As Cointelegraph previously reported, LTC briefly flipped XRP for the fourth spot over the weekend. At press time, XRP’s market value was only $140 million higher than Litecoin’s.
Tetragon Sues Ripple To Force Stock Redemption
One of Ripple Labs’ big financial backers is looking to reverse its bet on the XRP issuer.
Tetragon Financial Group LTD, the multi-billion asset manager-turned-plaintiff, had led Ripple’s $200 million funding round in December 2019. On Monday night the U.K.-based firm moved to exit its position in a sealed filing in Delaware Chancery Court, according to Bloomberg.
Just weeks ago the U.S. Securities and Exchange Commission put Ripple’s future in doubt with a blockbuster suit alleging XRP (-1.69%) to be an unregistered security. That’s spooked the XRP markets and now, apparently, Ripple investors, too.
Tetragon seeks to “enforce its contractual right to require Ripple to redeem” Series C preferred stock, Bloomberg reported. In the meantime, Tetragon wants the court to essentially freeze Ripple’s liquid assets until it pays.
The filings were not immediately available at press time.
XRP Sinks Below LTC Again After New Lawsuit From Major Investor
XRP has fallen below Litecoin by market cap after a major investor filed a new lawsuit against Ripple.
XRP has once again lost its place as the fourth-largest cryptocurrency, with lawsuits mounting against Ripple after one of its major investors followed the SEC in filing a complaint against the project.
According to a Jan. 6 report from Bloomberg, Tetragon, one of the lead investors in a $200 million Series C funding round for Ripple in 2019, has filed a complaint against the firm in the Delaware Chancery Court.
The investment company claims it is seeking a court to “enforce its contractual right to require Ripple to redeem” Series C preferred stock held by Tetragon. In addition, the firm is petitioning the court to stop Ripple from using “any cash or other liquid assets” until the matter is settled.
Ripple has responded to the allegations, claiming the lawsuit has “no merit” and accusing Tetragon of taking advantage of “the lack of regulatory clarity” in the United States in filing the suit.
The firm’s executives have previously criticized regulators in the U.S. — hinting the firm would relocate its headquarters off-shore to flee the United States’ “regulation through enforcement.”
Amid lawsuits from both the U.S. Securities and Exchange Commission, or SEC, and now Tetragon, XRP has lost its position as the fourth-largest cryptocurrency by market capitalization. According to data from CoinMarketCap, XRP’s $10.3 billion market cap sits behind Litecoin’s $10.5, with LTC having grown by 26% over the last seven days while XRP’s market cap has stagnated. Litecoin first “flipped” XRP on Sunday, but it was a short-lived move.
In December, the SEC charged Ripple CEO Brad Garlinghouse and co-founder Chris Larsen with conducting an “unregistered, ongoing digital asset securities offering” for their XRP sales. The case is scheduled for a virtual pretrial conference in February.
Following the news, crypto exchanges including Coinbase, Bittrex, OKCoin, Bitstamp, OSL, Beaxy, and CrossTower have distanced themselves from XRP. Some have announced they would suspend trading for XRP, while others will delist the token entirely.
At the time of publication, the price of XRP is $0.22, having fallen 70% since late November.
Ripple co-founder Jed McCaleb Sold $400 Million Worth Of XRP In 2020
Ripple co-founder Jed McCaleb appears to have enjoyed a prosperous 2020, having sold more than $400 million worth of XRP over the last 12 months.
Stellar CTO and Ripple architect Jed McCaleb cashed out a whopping $411 million in XRP in 2020, according to an updated report from blockchain analytics account Whale Alert.
McCaleb sold 1.2 billion XRP throughout the year at an average price of $0.34 per coin — amassing close to half a billion dollars. The sum reportedly represents 27% of McCaleb’s XRP stash that is held in a settlement account with Ripple Labs, and marks a sharp acceleration of his sales to date. He sold roughly one billion XRP in the five years between 2014 and 2019.
By Whale Alert’s estimations, the combined value of McCaleb’s current and liquidated XRP holdings is approximately $1.2 billion, placing him high on crypto’s rich list.
McCaleb also appears to have timed his sales well, with Ripple currently facing lawsuits from both the SEC and from a major investor who participated in the firm’s $200 million Series C funding round in 2019.
McCaleb controversially received a co-founders reward of 9.5 billion XRP when he left Ripple Labs in 2014. During the same year, McCaleb signed an agreement with Ripple Labs that limited the amount of XRP he can sell per week in order to avoid negative pressure on the market.
Despite receiving widespread criticism, McCaleb has repeatedly sought to assure investors that his selling has not impacted the price of XRP. McCaleb’s agreement with Ripple Labs comes to an end in 2023.
On Jan. 1, 2020, McCaleb received 477.7 million XRP from his settlement account with Ripple Labs. McCaleb’s associated wallet still holds 652.1 million XRP — worth approximately $147 million at current prices.
In the original report on McCaleb’s XRP sales in February, Whale Alert warned of the potential risks associated with a single entity wielding such a significant economic influence over a project with which they are no longer involved:
“Whether or not you believe the future is bright for blockchains like Ripple, the economic power and consequences of whales like Jed McCaleb cannot be ignored…”
XRP Price Soars 55% To ‘Crucial’ Level As Bitcoin Notches New High At $38.5K
A sudden reversal of fortunes takes XRP 55% higher in 24 hours despite legal problems at Ripple persisting.
Bitcoin (BTC) continued its habit on Jan. 7 of hitting all-time highs almost every day as bulls took the largest cryptocurrency above $38,000.
BTC Price Passes $38,500
Data from Cointelegraph Markets, Coin360 and TradingView followed BTC/USD as it took out another hurdle on the way to the psychologically significant $40,000 milestone.
On Thursday, gains accelerated, with Bitcoin investors seeing 24-hour returns of 11.5%. Just a week ago at the start of the year, Bitcoin traded at $28,000.
As Cointelegraph reported, the largest cryptocurrency, together with Ether (ETH) and a handful of other altcoins, has become the best investment play of 2021, leaving even Tesla stock far behind.
TSLA was the winning punt of 2020 since the coronavirus crash in March, with Bitcoin also being beaten by Ether.
“The next correction is absolutely going to be painful for all the #FOMO buyers,” Cointelegraph Markets analyst Michaël van de Poppe warned Twitter followers as Bitcoin reached another new record high of $38,510.
XRP Abruptly Comes Back From The Dead
In altcoins, meanwhile, a curious renaissance occurred for embattled number-four cryptocurrency XRP.
Ripple CEO Answers 5 Key Questions About The SEC Lawsuit
Ripple’s CEO, Brad Garlinghouse, has responded to some of the community’s concerns surrounding the SEC’s $1.3 billion lawsuit against the firm.
Ripple CEO Brad Garlinghouse has revealed the firm unsuccessfully attempted to settle its securities violation lawsuit with the United States Securities and Exchange Commission and slammed the “regulatory chaos” around cryptocurrencies.
In a Twitter thread addressing what he described as “5 key questions,” the CEO strongly denied the “SEC’s unproven allegations” and claimed his firm is “on the right side of the facts and of history.”
Garlinghouse Said Ripple Would Continue To Work Toward A Settlement With The SEC:
“Know we tried — and will continue to try w/ the new administration — to resolve this in a way so the XRP community can continue innovating, consumers are protected and orderly markets are preserved.”
The SEC filed a $1.38 billion lawsuit against Ripple, Garlinghouse and co-founder Chris Larsen in December 2020 over the sale of XRP as an unregistered security. Since the news broke, more than 25 platforms including Coinbase, Bittrex, OKCoin and Bitstamp have suspended trading or delisted the token.
Garlinghouse did not directly address whether Ripple had ever paid for exchanges to list XRP; however, he did say that it was one of the most liquid digital assets in the world and that 95% was traded outside the United States. He was unable to say when the token would be relisted, noting that “Ripple has no control over where XRP gets listed, who owns it,” calling it open-source and decentralized.
Garlinghouse’s Answer, However, Left Many Readers Wanting More:
Garlinghouse indicated the company was disappointed that one of their biggest investors, Tetragon — which owns 1.5% of the company — filed a related lawsuit. However, he claimed the company’s other investors still had faith in Ripple.
Garlinghouse said Ripple was currently drafting its response to the lawsuit, which it will file within weeks, adding that Ripple’s general counsel, Stuart Alderoty, will provide more information.
The Ripple CEO said he was more optimistic about the chances for appropriate regulation in 2021 and that he expected the Digital Commodity Exchange Act to be reintroduced:
“We’ve moved from lack of regulatory clarity to regulatory chaos in the U.S. This is why regulation by enforcement is such bad public policy. With the new administration, we expect #DCEA to be reintroduced — common-sense legislation providing clarity to the entire industry.”
Controversy isn’t a new thing for the firm behind crypto’s fourth-largest coin by market capitalization. Over the last few years, Ripple has been stung by criticism over its massive token liquidations, in addition to a class-action lawsuit accusing Garlinghouse of misleading investors about the attractiveness of XRP.
Despite this week’s recovery of 48%, the token is still 44% down in price from 30 days ago, according to CoinGecko.
The SEC’s case comes on the back of last year’s wins against two social media platforms, Telegram and Kik, after both violated U.S. securities laws in relation to initial coin offerings.
Asia’s Retail FOMO Could Be Behind XRP’s Rally Despite SEC’s Lawsuit
XRP’s double-digit gains could be the result of a bold bet by retail investors, especially those in Asia, that the cryptocurrency’s price could follow the broader crypto bull run. The latest rally surprised many because it is happening not long after XRP crashed on the news the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Inc., claiming the company sold the token as a security.
That said, it seems as if some market participants are undeterred by the regulator’s action.
“Traders often trade products on a relative value basis,” Chris Thomas, head of digital assets at Swissquote Bank, told CoinDesk on Jan.7. “XRP felt cheap a few days ago. Today it feels normal again, in my opinion.”
Simons Chen, a crypto trader based in Hong Kong, told CoinDesk he bought XRP when the price went to nearly its bottom point at the end of December with the belief that it would rebound soon, following bitcoin’s trend.
Chen said that when bitcoin and other alternative cryptocurrencies (altcoins) were going up, XRPs price went the opposite way because of the SEC news. That movement, to him, meant a great opportunity to “buy the dip.”
Trading volumes from major exchanges globally, particularly in Asia, also show significant traffic in the XRP/USDT (tether) and XRP/KRW (Korean won) pairings, according to data from Nomics.
CoinDesk Research collected XRP trading volume data since Dec. 1, 2020, from six exchanges that saw noticeable activity and broke down the data by quote currency. Significant volumes came from the XRP/USDT and XRP/KRW ) pairings, yet volumes on XRP/bitcoin and XRP/ether pairings were relatively small.
Tether, a dollar-pegged stablecoin, is frequently used by traders and investors in Asia, especially in China, to buy cryptocurrencies. Due to regulations in South Korea, people there often buy cryptocurrencies directly from fiat on Korea-based exchanges. The data indicates the markets in Asia have been the main driver of the price rally.
Even though multiple exchanges, especially those that have a presence in the U.S., have announced suspension or delisting of XRP on their platforms, XRP pairings are still available on many other exchanges, including the so-called “Big Three” – Binance, Huobi, and OKEx – all of which first started in China.
“Unlike Coinbase or other ‘regulated’ exchanges, Korean and [other] Asian exchanges do not need to care that much of what the SEC does, and investors in Asia are less sensitive about the news,” said Sinhae Lee, partner at Shanghai-based blockchain consulting firm Block72. “With the current major altcoins’ price appreciation, investors bought XRP as its price went down a lot.”
The lack of institutional investors, particularly those based in the U.S., is evidence that non-U.S. retail investors are most likely the reason for XRP’s rebound, according to Lingxiao Yang, chief operating officer at crypto quant firm Trade Terminal. Yang said large digital asset managersincluding Grayscale have dropped XRP from their funds, “a death penalty” for XRP’s market in the U.S. [Grayscale is owned by DCG, CoinDesk’s parent company.]
If retail investors’ increasing appetite is the only driver of XRP’s price, it is hard to tell whether the price will remain healthy in the long term. A key factor will be what happens between Ripple and the SEC. Just Wednesday, the company’s CEO, Brad Garlinghouse, said his company “tried” to settle charges of conducting unregistered securities transactions with the SEC.
“If the SEC rejected [Ripple’s] proposal [to settle] and there seems nothing more than a court case, then the token is now over-valued, in my opinion.” Swissquote’s Thomas said. “As an 18-month court case it will weigh heavily on the asset.”
At the press time, XRP traded at $0.31, down 8.95% in the past 24 hours but up 14.2% from the December low of around $0.17.
XRP Tumbles Despite Former Amazon Exec Joining Ripple As Engineering Lead
“Ripple’s all-star engineering team continues to grow,” Ripple CEO Brad Garlinghouse said of the firm’s new senior VP.
Amid legal action from the SEC, Ripple has brought in fresh blood from Amazon to lead its engineering team.
In a statement released today, Ripple CEO Brad Garlinghouse announced that former Amazon vice president of delivery experience, Devraj Varadhan, has joined Ripple as its new senior vice president of engineering.
Varadhan has 15 years’ experience at Amazon, where he worked on software development for more than a decade prior to becoming VP of delivery experience. He also spent two years developing cloud and enterprise software with Microsoft.
With Ripple, Varadhan plans to place an emphasis on building “architecturally sound systems aligned with customer and business needs.”
Though the price of XRP returned to the $0.30 range last week following a significant downturn in December, it has slipped below the critical support level again. At the time of writing, the token is trading for $0.28 after falling roughly 9% in the last 24 hours.
XRP’s volatility has been attributed to charges brought by the U.S. Securities and Exchange Commission against Ripple, the firm’s co-founder Chris Larsen, and CEO Brad Garlinghouse in December.
The SEC accuses Ripple of conducting an “unregistered, ongoing digital asset securities offering” through its XRP sales, with the allegations prompting many crypto exchanges to delist or suspend trading of the token.
The commission’s case against Ripple will begin with a virtual pretrial conference on Feb. 22.
Ripple Is Hiring Director of Engineering For RippleX Platform
The planned new hire along with a recent expansion show Ripple does not seem deterred by legal troubles in the U.S.
Blockchain firm Ripple is hiring a new director of engineering to lead the team building its open-source developer services for its payments platform RippleX.
* In a blog post, the blockchain firm said it is looking for an engineer to expand its infrastructure that supports Ripple technologies such as XRPL as well as other developer tools and services.
* The role involves shipping products that make it easier for its developers to actualize the future of the “Internet of Value” which is a concept proposed by Ripple where value is transferred as easily as data.
* Ripple has been expanding its services, on Jan. 15 Ripple inked a deal with a Malaysian money transfer business and Bangladesh’s largest mobile financial services provider to enable a remittance corridor between the two countries.
* Malaysia’s Mobile Money and Bangladesh’s bKash will leverage Ripple’s global payments network, RippleNet, for wallet-to-wallet transactions.
* The expansion and planned new hire show Ripple does not seem deterred by the legal troubles in the U.S. The company is being sued by the U.S. Securities and Exchange Commission over the claim it violated federal securities laws by selling the XRP cryptocurrency to retail consumers.
Ripple Is One IPO That May Have May Never Happen
San Francisco company says its signature product, known as XRP, is a currency that shouldn’t be subject to securities laws.
Brad Garlinghouse, the chief executive of Ripple, was last year publicly contemplating at the World Economic Forum in Davos, Switzerland, an initial public offering for the San Francisco startup.
The company had just raised about $200 million in a round of venture funding led by Tetragon Financial Group, TFG 1.04% with a $10 billion valuation. The value of its signature product, a cryptocurrency called XRP, had fallen over the previous year.
But Ripple was poised to rebuild the infrastructure for cross-border trades, Mr. Garlinghouse said, promising that its future was bright.
A year later, an IPO is off the table. Instead, Ripple’s future hinges on a judge’s ruling in a civil lawsuit filed in December by the Securities and Exchange Commission.
Regardless of the outcome, the case is expected to become a key precedent for how U.S. regulators craft rules and laws covering cryptocurrencies. It also highlights a broader truth about most digital currencies: Beyond the two largest, bitcoin and ether, most of the hundreds of others have struggled to find a utilitarian value beyond speculation.
At the heart of the SEC’s suit is a debate about XRP, a bitcoin-like digital asset created by Ripple’s founders that would grow to become the world’s third-largest cryptocurrency. It was designed to be part of a network that would help banks cut expenses in cross-border transfers. The related software, however, never gained traction, the SEC alleges, leaving XRP without a clear purpose, other than to funnel sales to Ripple.
Unlike bitcoin, which operates across an open network that isn’t controlled by any one party, XRP is an asset whose value and viability depends almost wholly on the efforts of Ripple, the SEC alleges in its complaint. That makes it a security, and it should have been registered as such by Ripple years ago, according to the SEC.
Ripple said XRP is a currency that shouldn’t be subject to securities laws. If the company is forced to register XRP as a security in the U.S., its potential value as a cross-border instrument would be diminished.
XRP doesn’t fit several of the criteria of what is called the “Howey Test,” which the SEC uses to determine whether an asset is a security, said Andrew Ceresney, a partner at Debevoise & Plimpton LLP, the law firm representing Ripple in the SEC case.
XRP trades in a wide market against a range of other currencies, none of which Ripple controls, he said. Moreover, Ripple makes no promises in the sale of XRP, and the sale isn’t an investment contract, he added.
“To us, this is the SEC trying to stretch Howey beyond its breaking point,” Mr. Ceresney said.
The agency sees it differently. Ripple has earned more than $700 million from selling XRP to the public since its founding in 2012, according to the SEC, which said the company had generated only $23 million in revenue from sales of software through 2019. Banks haven’t adopted it at any scale, and the few that have used it have been directly subsidized by Ripple, the SEC alleges.
If the SEC wins its case, it might bar Ripple from selling any securities, including XRP. That could be a crippling blow to the company and an asset whose market value was nearly $150 billion at its intraday peak.
Such an outcome would be the highest-profile failure ever for the cryptocurrency sector, which has been marked by numerous token projects that have failed to deliver returns for investors. Hundreds of startups raised billions of dollars in 2017 and 2018 by selling initial-coin-offering tokens; virtually all of those projects failed, and a number of companies were charged with fraud.
Even as investors have piled back into bitcoin and ether in recent months, some describe the cryptocurrency sector as an arena rife with manipulation on unregulated exchanges and solely a momentum trade. Even bitcoin, skeptics say, hasn’t delivered on its initial promise of becoming a digital version of cash.
Investors holding XRP have watched the price plummet since the SEC case became public. It was trading at about 51 cents on Dec. 21, when Ripple publicly revealed that the suit was imminent. Since then, it has fallen about 45%, most recently trading at around 28 cents. The market value of the XRP in circulation has dropped to about $12 billion from an intraday peak of $148.8 billion in January 2018, according to CoinMarketCap.
Meanwhile, at least a half-dozen cryptocurrency exchanges—including Coinbase, one of the biggest—have delisted XRP since the SEC’s suit was filed. A number of market makers and asset managers have decided to stop handling XRP trades. Tetragon, the firm that led Ripple’s 2019 capital-raising round, has sued the company, demanding its investment back. Tetragon couldn’t be reached for comment.
Prevailing against the SEC will be daunting for Ripple, outsiders said.
The complaint shows a pattern of Ripple managing XRP like a security, selling it based on proprietary information, said Stephen Palley, a partner at the law firm Anderson Kill, who has a background in securities laws and cryptocurrencies.
The complaint, he said, appears to “walk up close to the line of securities fraud.” Recent SEC cases against Kik Interactive Inc. and Telegram Group Inc. will create a headwind for Ripple, he said. Both companies were sued by the SEC for allegedly creating unregistered securities. Kik lost; Telegram settled.
Phil Liu, the chief legal officer at Arca, a crypto-focused asset-management firm that doesn’t hold XRP, said that the SEC’s case is compelling.
Ripple appears to have no stable revenue streams outside of selling XRP, he said, adding that the products the company has developed “are wholly inadequate to support the operation.”
“I think that this thing will be a remnant of history by the end of 2021,” he said, referring to XRP.
It isn’t clear whether a change in leadership at the SEC will change the case’s trajectory. Gary Gensler, the Biden administration’s pick to lead the agency, is familiar with the cryptocurrency sector from his time as chairman of the Commodity Futures Trading Commission and has also taught cryptocurrency-focused courses at the Massachusetts Institute of Technology.
“We’re hopeful he will want to engage with us on these issues,” Mr. Ceresney said.
Ripple Demands To Know Why Ether Isn’t A Security As XRP Defense Gets Desperate
Ripple has filed a Freedom of Information Act request with the SEC which targets documents pertaining to Ethereum co-founders.
Ripple’s case before the Securities and Exchange Commission is threatening to have major, well, ripple effects for the industry.
On Jan. 29, Ripple Labs filed its response to the SEC’s complaint. Ripple, as it has many times before, argued that XRP is not a security i.e. an investment in Ripple and is therefore not in the SEC’s jurisdiction. Ripple is, moreover, prepared to drag the rest of the industry into its fight to make its case.
A Ripple Representative Told Cointelegraph:
“The SEC has clearly picked two winners and ignored a growing and robust industry that is much larger than Bitcoin and Ether. In addition to discovery we will seek directly in the lawsuit, we filed a Freedom of Information Act (FOIA) request for more information about how the SEC determined the status of Ether as a non-security.”
The FOIA request in question, which is available here, brings into question Ether’s status. Representatives at the SEC have repeated many times that, while its presale may have been a securities offering at the time, Ether is sufficiently decentralized that it qualifies as a commodity and thus, Ether trading in the U.S. is under the jurisdiction of the Commodity Futures Trading Commission.
The FOIA request specifically asks for “All communications with the Ethereum Foundation and/or other relevant companies (including, but not limited to, ConsenSys) or individuals in the ether ecosystem (including but not limited to, Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, Amir Chetrit, Joseph Lubin, Gavin Wood and Jeffrey Wilcke), or any attorneys or other individuals representing the Ethereum Foundation or other relevant companies or individuals in the ether ecosystem, and all documents, including internal communications, analyses, and other materials, that were prepared or relied upon by Director Hinman, or any other current or former Division Director, Staff, or Commissioner in reaching the determination that ether is not a security, including drafts of Director Hinman’s statements regarding ether and analyses prepared by SEC staff.”
The request is likely to entail a huge volume of records from several years of commission documents, given how long it took the commission to come forward with any statements at all.
The question of timing is critical in the Ether as security or commodity discussion. The Ether presale happened years before the SEC issued its DAO Report. A response to the meltdown of Ether investment into the Decentralized Autonomous Organization, the DAO Report was the SEC’s 2017 declaration that some cryptocurrencies were securities.
The subsequent years have seen enormous confusion as to what qualifies an initial coin offering as a security or not. Important to note is that Bitcoin, never having had a presale, never comes up in these conversations.
The SEC has, nevertheless, never pursued Ether. But in December, the commission filed against Ripple in a landmark case that alleges that Ripple Labs’ sale of XRP constitutes an ongoing sale of investment contracts in the firm.
In its FOIA request, Ripple leans especially heavily on the claim that Bitcoin and Ether are both controlled by China-based mining pools, playing off of longstanding fears by U.S. regulators of Chinese control of digital assets.
Ripple further asks for communications between the commission, particularly Division of Corporation Finance Director Bill Hinman, and key figures and attorneys for the Ethereum Foundation.
While it is almost inconceivable that the SEC will back out of its many statements that Ether is a commodity at this stage in the game, Ripple’s aim seems to be to undercut the legitimacy of that decision in an effort to shore up its own defense.
The SEC’s case against Ripple has been coming for a long time, and Ripple has expended significant resources in trying to stave it off. While XRP also predates the DAO Report, the key argument is that Ripple continues to control the bulk of the XRP market in a way that, for example, the Ethereum Foundation, Vitalik Buterin, and Joe Lubin do not.
Since the SEC’s announcement, the price of XRP has collapsed and many U.S. exchanges have delisted the token.
Pretrial Settlement Not In The Cards In SEC vs. Ripple Case
Both parties are currently not considering terms for a pretrial settlement.
The changing of the guard at the United States Securities and Exchange Commission seems to have affected any possible pretrial settlement in the SEC’s case against Ripple.
This conclusion was part of a joint discovery letter filed on Monday before Judge Analisa Torres of the U.S. District Court for the Southern District of New York.
Commenting On The Prospects Of A Pretrial Settlement, The Letter Reads:
“Counsel for the parties have met and conferred and, having previously discussed settlement, do not believe there is a prospect for settlement at this time. However, the parties will promptly notify the Court if any settlement in principle is reached as to any Defendant.”
Apart from the issues concerning a possible settlement, the letter also included agreements between both parties for the conclusion of the discovery process no later than Aug. 16, 2021.
The discovery letter also included plans by the SEC to seek an expanded deposition pool beyond the 10 prescribed under Federal law. According to the letter, the commission is interested in two memos received by Ripple and co-founder Chris Larsen allegedly containing warnings that XRP could be deemed an investment contract.
As previously reported by Cointelegraph, the case will begin with a virtual pretrial conference slated for Feb. 22.
Back in December, the SEC sued Ripple for violating securities regulations in the sale of XRP tokens. The action led to several U.S.-based crypto exchanges delisting or suspending the trading of XRP tokens on their platforms.
Investment firms also liquidated their XRP holdings in the wake of the SEC enforcement action. Meanwhile, Ripple spent $690,000, the most by any U.S. crypto company, in lobbying efforts in the country during 2020.
Ripple’s legal troubles are not only limited to the SEC as the company is also the subject of multiple class-action lawsuits from aggrieved investors all accusing the company of violating securities law.
MoneyGram Faces Lawsuit Over Alleged False Statements Regarding XRP
Ripple partner MoneyGram is facing a lawsuit alleging the firm issued misleading statements and failed to disclose XRP’s status as an unlicensed security.
Payments company MoneyGram International has been sued over allegedly false statements made regarding its partnership with Ripple Labs and its XRP cryptocurrency.
The class-action lawsuit, filed on Monday in California, was submitted by law firm Rosen on behalf of investors who purchased securities from MoneyGram between June 17, 2019 and February 22, 2021.
The global investor rights legal practice asserted MoneyGram made fraudulent statements regarding its partnership with Ripple Labs and the status of XRP as a security.
According to a post announcing a “strategic partnership” between the two companies in June 2019, MoneyGram utilized Ripple’s xRapid product, “leveraging XRP in foreign exchange” settlements as part of its cross-border payments process.
However, on Dec. 23, the company clarified it is not dependent on Ripple’s xRapid service — which was rebranded to On-Demand-Liquidity, or ODL, in 2019 — for its foreign exchange trading needs:
“MoneyGram does not utilize the ODL platform or RippleNet for direct transfers of consumer funds — digital or otherwise. Furthermore, MoneyGram is not a party to the SEC action.”
MoneyGram suspended the partnership with Ripple in late February after the United States Securities and Exchange Commission filed a complaint against Ripple Labs alleging securities violations in December 2020.
Rosen alleged that MoneyGram failed to disclose that XRP was viewed as an unregistered, unlawful security by the SEC.
Additionally, in the event that the SEC decided to enforce securities laws against Ripple, MoneyGram would be likely to lose the lucrative stream of market development fees that was critical to its financial result, Rosen added:
“As a result, defendants’ public statements were materially false and/or misleading at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.”
Ripple paid MoneyGram for using its platform while providing financial incentives for helping the startup expand to new markets.
The Wall Street Journal reported that MoneyGram received $38 million in net market development fees from Ripple in 2020, representing about 15% of the company’s adjusted earnings.
The agreement between the two companies was due to expire in 2023, with the San Francisco fintech firm also having agreed to invest up to $50 million in MoneyGram.
Ripple Investor Loses Bid To Force Stock Redemption On SEC Claim
Ripple Labs Inc. fended off an effort by a U.K. investment firm to redeem its equity in the blockchain company in the wake of a U.S. Securities and Exchange Commission lawsuit alleging that Ripple’s XRP token is an unregistered security.
A Delaware Chancery Court judge on Friday rejected a request by Tetragon Financial Group Ltd. for an order requiring Ripple to redeem Series C preferred stock held by Tetragon and to block Ripple from using any cash or other liquid assets until the payment is made.
Ripple argued that there’s been no determination that XRP is an unregistered security. The judge agreed that until the SEC case is resolved, XRP’s status remains an open question.
“The SEC still has to try to prove their case in court, which we do not believe they will be able to do,” Ripple said in a statement. “As our lawyers have said publicly, the SEC is ‘dead wrong.’”
Ripple, MoneyGram To ‘Wind Down’ Partnership
This ends an agreement the two companies had put on hold in February.
Ripple Labs said it and MoneyGram have decided to wind down their partnership agreement.
* This ends an agreement the two companies had put on hold in February.
* Under terms of the agreement that was put on hold and is now ending, Ripple had been paying MoneyGram to use the XRP token in international settlement since 2019 and first engaging in a pilot agreement with the service in 2018. Since then, MoneyGram had netted $61.5 million in “market development fees” from Ripple.
* Shares of MoneyGram dropped in after-hours trading, down 7%.
* The agreement was put on hold after U.S. Securities and Exchange Commission sued Ripple saying XRP is an unregistered security in violation of U.S. investments law. Ripple is fighting those assertions.
* Ripple said the two sides are “committed” to revisiting their relationship in the future.
Ripple Ends Youtube Lawsuit Over XRP Giveaway Scams, Says CEO
Ripple and its CEO Brad Garlinghouse had alleged that YouTube profited monetarily from fraudulent XRP giveaways.
Ripple has ended its lawsuit against YouTube for the social media platform’s alleged complicity in a spate of fake XRP giveaway scams, CEO Brad Garlinghouse announced on March 9.
Ripple and Garlinghouse filed a lawsuit against YouTube LLC in April 2020, claiming that the platform itself had profited from the fraudulent activity, and that it had failed to exercise its administrative powers to stop it. Garlinghouse announced on Twitter on March 9:
“Last year, @Ripple and I sued @YouTube for failing to enforce its own policies by allowing fake accounts (impersonating my/Ripple’s verified accounts) to conduct XRP giveaway scams. We’ve now come to a resolution to work together to prevent, detect and take down these scams.”
The scams relied on spear-phishing attacks, where a user’s account would be commandeered and its content erased. The account would then be set up to look like a prominent cryptocurrency figure, such as Garlinghouse himself. A fake XRP giveaway would then be launched, which solicited sums between 5,000 and 1,000,000 XRP from users on the promise that five times the original amount would be returned to them.
Ripple and Garlinghouse alleged that YouTube knowingly profited from such scams due to its tendency to continue to run advertisements on the fraudulent videos in question.
Garlinghouse suggested progress was being made, but that social media sites still had a responsibility to lead the clean-up of their own platforms. Garlinghouse wrote:
“Social platforms are starting to acknowledge their role in allowing crypto scams to persist and recognize the need to be part of the solution. Some like @xrpforensics are helping detect/track stolen funds, but platforms need to lead the charge or it’s still just whack-a-mole.”
Details regarding the nature of the settlement between Ripple and YouTube remain confidential, said Garlinghouse, who noted that accountability was required at a time when national governments were examining the cryptocurrency space more closely.
Ripple remains under investigation by the United States Securities and Exchange Commission for an alleged violation of the securities act. The SEC claims Ripple failed to properly register XRP prior to facilitating $1.38 billion worth of sales to investors.
Ripple Execs Refute SEC Investigation Of Personal Finances As Overreach
“How much they spend at the grocery store” isn’t relevant to the SEC’s ongoing XRP securities lawsuit, argues the legal team for Bradley Garlinghouse and Christian Larsen.
Ripple executives Bradley Garlinghouse and Christian Larsen have rejected demands by the United States Securities and Exchange Commission to provide personal financial information as part of the ongoing investigation into a possible XRP sales securities violation.
On March 11, lawyers for the Ripple Labs co-founders requested a protective order regarding their personal information and called for the court to quash subpoenas issued to six of the defendants’ banks.
The banking institutions named specifically were SVB Financial Group, First Republic Bank, the Federal Reserve Bank of New York, Silver Lake Bank, Silvergate Bank and Citibank.
Lawyers for Garlinghouse and Larsen argued that the SEC had overreached the proper breadth of its investigations when it asserted that the defendants had intermingled their personal finances with those of Ripple Labs. Thursday’s filing stated:
“The SEC’s multi-front attempt to troll through the Individual Defendant’s personal financial information in a non-fraud litigation, where the Defendants have already agreed to produce the relevant information regarding the challenged transactions, is a wholly inappropriate overreach.”
The “challenged transactions” in question relate to the unregistered sale of 14.6 billion XRP beginning in 2013 — a sum worth $1.38 billion at the time of the complaint, now worth $6.5 billion.
The legal team for Garlinghouse and Larsen make clear their clients’ willingness to cooperate regarding financial records relating to the XRP sales, including trading records, and documentation of compensation that both have received from Ripple.
“Specifically, the Individual Defendants have agreed to produce (a) trading records relating to the sales of XRP that the SEC is challenging in this case, and (b) financial records concerning the compensation that they have received from Ripple,” stated the filing.
Financial records concerning unrelated business activities, and day-today spending accounts, according to the lawyers, are not pertinent to the case at hand. The filing stated:
“As drafted, therefore, these requests demand everything from the proceeds of unrelated business activities to how much money they spend at the grocery store every week.”
The subpoenas issued by the SEC call for years of transaction data and monthly statements from Garlinghouse and Larsen’s personal bank accounts, including images of all money orders, checks, and electronic fund transfers.
However, not everyone believes the SEC’s subpoenas are necessarily without merit. Attorney-at-law, and partner at Anderson Kill, Preston Byrne, told Cointelegraph that such sweeping orders were commonly granted to government agencies by courts, on the notion that the agencies were better positioned to conduct investigations than the courts themselves. Byrne said:
“The SEC is permitted to issue a subpoena pursuant to any legitimate purpose. Courts traditionally grant government agencies exercising investigative subpoena powers considerable deference under the theory that the agencies are better placed than the courts to conduct investigations,” said Byrne, adding, “SEC subpoenas can accordingly be fairly sweeping and intrusive.”
In Byrne’s opinion, Garlinghouse and Larsen’s personal financial records are indeed pursuant to the matter at hand. While Byrne isn’t surprised that the Ripple execs are pushing back against this point, he will be surprised if they succeed.
“In this instance personal financial records would seem to be material to the investigation. I’m not surprised that Garlinghouse and Larsen are pushing back, but I’d be surprised if they succeed.”
SEC Presses Ahead With Ripple Lawsuit With Gensler At The Helm
U.S. Securities and Exchange Commission Chairman Gary Gensler is showing no signs of backing away from the regulator’s high-stakes lawsuit against Ripple Labs Inc.
In a Wednesday court filing, the first the SEC has submitted in the case since Gensler took over last week, the agency asked a federal judge to block Ripple’s demands that the regulator turn over internal emails and communications on officials’ personal devices. The move signals that the SEC is pushing ahead with its December suit allegedly Ripple sold the XRP digital token without properly registering it as a security.
In its latest filing, the SEC accused Ripple of trying to “harass” the agency and “gamesmanship with respect to discovery.” The case, which prompted XRP to plunge after the SEC sued, is being closely watched by the crypto industry because it has implications for dozens of other coins. While U.S. regulators have stated that Bitcoin and Ether aren’t securities, officials haven’t said the same about other tokens, meaning they could also face SEC lawsuits.
Some digital-coin enthusiasts have been hopeful that Gensler, who has taught courses on cryptocurrencies at the Massachusetts Institute of Technology, will embrace the asset class and clear up regulatory uncertainties that have cast a cloud over the industry.
Court Denies SEC Access To Ripple’s Legal Advice
Ripple’s legal battle with U.S. regulators continues.
Ripple has scored another win in its ongoing legal battle against the United States Securities and Exchange Commission as the court has denied the SEC access to Ripple’s legal advice.
Magistrate Judge Sarah Netburn of the District Court for the Southern District of New York ruled Sunday to deny the SEC’s motion to compel Ripple to produce memos discussing XRP sales with the firm’s lawyers.
According to the SEC, Ripple could have been aware that XRP could be a security from its legal advisors before moving forward with its token sale back in 2013.
The SEC filed a motion on May 7 to compel Ripple to produce all communications discussing any legal advice Ripple sought or received as to whether its offers and sales of XRP would be subject to federal securities laws.
In the latest ruling, Netburn referred to the attorney-client privilege that is meant to “encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.”
The judge noted that Ripple has not waived its attorney-client privilege despite defendants being able to waive it in certain circumstances.
The ruling also pays special attention to the rule of fair notice, which requires the courts to construe ambiguous criminal statutes in favor of the defendant. In asserting this defense, Ripple claims that the SEC failed to provide market participants with fair notice that the regulator considered XRP a security.
“In support, it cites to the SEC’s eight-year delay in pursuing enforcement action against Ripple for its alleged securities violations — even after XRP was listed on over 200 cryptocurrency exchanges, billions of dollars of XRP sales transactions had taken place, and Ripple had entered a settlement with the U.S. Department of Justice and FinCEN that described XRP as a ‘convertible virtual currency,’” Netburn wrote.
The judge noted that the SEC may renew its motion application if Ripple “raises its beliefs or relies upon its privileged communications in support of its fair notice defense.”
The latest ruling is yet another milestone in the SEC’s battle against Ripple after the regulator filed a lawsuit against Ripple Labs, CEO Brad Garlinghouse and executive chairman Chris Larsen in December 2020, alleging that XRP was a $1.3-billion unregistered securities offering.
Ripple has managed to achieve a series of legal victories, including winning access to internal SEC discussion history regarding cryptocurrencies in April. The court also denied the SEC the ability to disclose the financial records of Garlinghouse and Larsen.
Last week, Garlinghouse confirmed Ripple’s plans to go public after the firm resolves its case with the SEC, stating that the likelihood of this scenario was “very high at some point.”
Ripple Seeks Docs From 15 Offshore Exchanges It Says Could Be ‘Fatal’ To The SEC’s Charges
Ripple believes records held by offshore exchanges will prove its executives did not violate Section 5 of the Securities Act by offloading XRP on the U.S. public.
Ripple CEO Brad Garlinghouse and co-founder Chris Larsen, have filed a motion requesting the U.S. Securities and Exchange Commission investigate Bitfinex’s parent company, iFinex, and 14 other international crypto exchanges.
The June 2 motion requests documents from exchanges including iFinex, Bitforex, Bithumb, Bitlish, BitMart, AscendEX (formerly Bitmax), Bitrue Singapore, Bitstamp, Coinbene, HitBTC, Huobi Global, Korbit, OKEx, Upbit Singapore, and ZB Network Technology.
The motion’s supporting memorandum notes the letters of request solicit assistance from authorities in the Cayman Islands, Hong Kong, South Korea, the United Kingdom, Singapore, Seychelles, and Malta.
The SEC’s amended complaint against Ripple accuses Garlinghouse and Larsen of selling more than two billion units of XRP to “public investors” located “all over the world,” with the SEC seeking disgorgement from Ripple’s executives based on the sales.
Ripple’s executives deny the SEC’s allegations they violated Section 5 of the 1933 Securities Act, emphasizing that Section 5 specifically prohibits the domestic sale of securities without a registration statement. Garlinghouse and Larsen’s legal representation counter that their XRP sales were conducted on foreign exchanges and thus outside of the SEC’s jurisdiction:
“In the case of transactions conducted on such foreign trading platforms, both the offers of XRP and the sales of XRP occurred on the books and records of the respective platforms, and therefore geographically outside the United States. The SEC’s failure to allege domestic offers and sales should be fatal to its claims.”
Ripple asserts the exchanges and related entities subject to its new motion “possess unique documents and information” regarding Ripple’s legal battle with the SEC, specifically concerning “the process by which transactions in XRP allegedly conducted by the Individual Defendants on foreign digital asset trading platforms were conducted.”
The SEC amended its complaint against Ripple and the firm’s executives in February, alleging their sales of XRP suppressed the crypto asset’s price. The complaint also accuses Garlinghouse and Larsen of misleading public investors while offloading billions of dollars worth of XRP as Garlinghouse repeatedly claimed he was “very long” on XRP during the time of the alleged sales.
The filing comes just days after a significant blow was dealt to the SEC’s case against Fipple, with the court rejecting the SEC’s bid to access communications between Ripple and its legal counsel.
Judge Dismisses Anti-Money-Laundering Charges Against MoneyGram
The order concludes a settlement agreement the company entered into in 2012 for failing to prevent mass-marketing and consumer-fraud phishing schemes.
Anti-money-laundering charges against MoneyGram International Inc. were dismissed after prosecutors said the money-transfer company had complied with the terms of a long-running settlement agreement.
The order by Judge Christopher Conner of the U.S. District Court in Harrisburg, Pa., on Thursday brought to a close MoneyGram’s more than eight-year effort to win the U.S. Justice Department’s approval for its compliance program.
Prosecutors last month asked Judge Conner to dismiss a court filing from 2012 that charged the Dallas-based company with aiding and abetting wire fraud and violating the Bank Secrecy Act.
The dismissal comes after an independent monitor in April certified that MoneyGram’s compliance program was reasonably designed and implemented. The monitor, the company’s second, was John Carey, a senior managing director with the consulting group Treliant, according to a Justice Department spokesman.
Mr. Carey, who took up oversight of MoneyGram’s compliance overhaul from another monitor in 2018, previously declined to comment on the certification, saying he is bound by a confidentiality agreement.
MoneyGram had struggled to get past the settlement, which arose from a series of mass-marketing and consumer-fraud phishing schemes that prosecutors said were perpetrated in part by corrupt company agents and defrauded tens of thousands of victims.
The company’s deferred-prosecution agreement, which was meant to last five years, was extended seven times. In 2018, the Justice Department determined that MoneyGram had breached the agreement and that its compliance program still had significant weaknesses, which led to a 30-month extension of the settlement and more penalties. MoneyGram ultimately forfeited a total of $225 million over the course of the settlement.
Prosecutors last month also confirmed that the company had paid the entirety of the fines imposed on it as part of the settlement. The funds were made available to victims of the fraud who had transmitted money through MoneyGram between 2004 and 2009, and between 2013 and 2017, prosecutors said in a court filing on Wednesday.
A MoneyGram spokesman said the company was pleased to have concluded the deferred-prosecution agreement and monitorship.
“MoneyGram has implemented the highest consumer-data collection capabilities in the industry and its customer ID verification standards, technology platforms and data-driven controls have helped to bring consumer fraud rates to all-time lows,” the spokesman said.
The company has made a number of improvements to its compliance program in recent years, according to past remarks by its chief compliance officer, Andy Villareal.
MoneyGram now has new point-of-sale identification requirements and technology that helps it stay ahead of evolving schemes by fraudsters, he said. Since 2018, it has required senders and receivers of any transaction exceeding $1 to verify their identities.
Ripple Granted Access To Binance’s Records In SEC Securities Case
The documents may provide critical evidence that CEO Brad Garlinghouse was acting outside of the SEC’s jurisdiction.
The ongoing case between fintech firm Ripple and the United States Securities and Exchange Commission took another turn this week when the company was granted access to Binance’s documents.
U.S. Magistrate Judge Sarah Netburn granted Ripple CEO Brad Garlinghouse’s motion to “obtain international discovery” of Binance records. According to the docket, the approval was made on Tuesday while a duplicate request was denied:
“ORDER granting 274 Letter Motion for Discovery. The Court will communicate with counsel to arrange delivery of the letters.”
As part of the case against Ripple for selling unregistered securities, the SEC claims that Garlinghouse sold more than 357 million XRP tokens on crypto trading platforms to investors “all over the world.”
The legal team representing Garlinghouse requested documents “relevant to the case and unobtainable through other means” from Binance Holdings Limited on Monday.
The filing stated that the Ripple CEO sought foreign discovery on the basis of his good faith belief that Binance possessed unique documents and information concerning this case. The records concern XRP transactions that were allegedly conducted by Garlinghouse and may provide evidence that the Ripple executive made the transactions outside the jurisdiction of the SEC.
Ripple’s legal team cited Section Five of the 1933 Securities Act, stating the alleged illegal XRP sales applied only to domestic sales and securities offers. The lawyers stated that Garlinghouse’s sales of XRP were “overwhelmingly made on digital asset trading platforms outside of the United States” and are not subject to the law that the SEC has invoked.
In June, Garlinghouse and Chris Larsen filed a motion petitioning international authorities to request documents from several other non-U.S.-based crypto exchanges, including Bitstamp, Huobi and Upbit.
Ripple also argues that the SEC cannot regulate XRP as a security because it is a medium of exchange used for international and domestic transactions. In mid-July, Judge Netburn allowed the firm to depose William Hinman, a former SEC official who stated publicly that Ether (ETH) was not a security.
The lawsuit began in December 2020 when the SEC filed against Ripple, alleging that Garlinghouse and co-founder Larsen had been conducting an “unregistered, ongoing digital asset securities offering” with their XRP token sales.
Brad Garlinghouse’s Lawyers File Request For Binance Documents In ‘International’ Challenge To SEC Lawsuit
“The offers and sales that the SEC challenges did not occur in this country and are not subject to the law that the SEC has invoked in this case,” said the legal team.
The lawsuit between Ripple Labs and the U.S. Securities and Exchange Commission, or SEC, now involves major crypto exchange Binance after a recent filing on behalf of Ripple CEO Brad Garlinghouse.
According to court documents filed in the Southern District of New York on Monday, Garlinghouse’s legal team has requested documents “relevant to the case and unobtainable through other means” from Binance Holdings Limited, the Cayman Islands-based subsidiary of the major cryptocurrency exchange. The filing cited U.S. laws concerning the Department of State and the Hague Convention and asked the court to issue a letter of request for the Central Authority of the Cayman Island to compel evidence from Binance.
“Mr. Garlinghouse seeks foreign discovery on the basis of his good faith belief that [Binance Holdings Limited] possesses unique documents and information concerning this case, and specifically, concerning the process by which transactions in XRP allegedly conducted by Mr. Garlinghouse on foreign digital asset trading platforms were conducted,” said the filing.
Specifically, the lawyers seem to be challenging claims from the SEC that the Ripple CEO sold more than 357 million XRP tokens on “worldwide” crypto trading platforms to investors “all over the world.” The team cited Section Five of the Securities Act of 1933, stating the alleged illegal XRP sales applied only to domestic sales and offers of securities. The documents requested of Binance may contain evidence in support of that claim.
“As the SEC knows, Mr. Garlinghouse’s sales of XRP were overwhelmingly made on digital asset trading platforms outside of the United States […] the discovery that Mr. Garlinghouse seeks will be relevant to demonstrating that the offers and sales that the SEC challenges did not occur in this country and are not subject to the law that the SEC has invoked in this case.”
The request is part of a lawsuit the SEC filed against Ripple in December, alleging the firm, Garlinghouse and co-founder Chris Larsen had been conducting an “unregistered, ongoing digital asset securities offering” with their XRP token sales. Ripple’s legal team had previously claimed that XRP is more like Bitcoin (BTC) or Ether (ETH) — which the regulatory body has classified as commodities rather than securities.
However, the firm seems to be switching gears — or trying to augment its case — by challenging allegations of domestic versus international token sales. Garlinghouse and Larsen filed a motion in June petitioning international authorities to request documents from several non-U.S.-based crypto exchanges including Bitstamp, Huobi, and Upbit. The case will reportedly end the pre-trial discovery process on Oct. 15.
SEC Wants ‘Terabytes’ Of Slack Communications From Ripple
The SEC said that the previous production of Slack messages from Ripple was incomplete, and a massive quantity of data has not been collected.
The legal battle between the United States Securities Exchange Commission (SEC and blockchain-based payments firm Ripple continues, with the regulator wanting further access to Ripple’s internal communications.
The SEC filed a motion with the Southern District of New York on Monday, requesting Judge Sarah Netbrun to order Ripple to produce and submit its employee messaging on business communication platform Slack.
The filing notes that Ripple’s previous production of Slack messages to the SEC was incomplete, with the firm eventually admitting that this was caused due to a “data processing mistake” after “repeatedly contending that its Slack production was complete.”
The SEC believes that Ripple only collected a small portion of its Slack messages and that a “massive quantity” of Slack data has not been collected or searched.
“Ripple’s data error and refusal to produce most documents has already been highly prejudicial to the SEC. Among other things, the SEC has deposed 11 Ripple witnesses using incomplete records of their communications,” the filing added.
According to the SEC, the missing documents include over 1 million messages comprising “terabytes of data” and eclipsing Ripple’s large email productions, which corroborates testimony that Ripple employees communicated at least as often by Slack as by email.
The authority emphasized that previous Slack messages shared by Ripple “have yielded critically important information” that wasn’t part of emails or other documents provided by the firm.
Ripple subsequently filed a request to extend the deadline to respond to the SEC’s motion regarding the Slack communications from Thursday, Aug. 12, to Monday, Aug. 16.
Attorney Jeremy Hogan, a popular lawyer within the XRP community, suggested that the SEC’s latest motion is yet another effort to prove that XRP should be treated as a security and thus fall under the commission’s jurisdiction.
“It is attacking from the flank and arguing Ripple marketed and treated XRP like a security and therefore it is. The SEC has had some success with this argument in the past and it makes sense as a strategy since in all substantive ways XRP is NOT like a security,” Hogan noted.
Last week, SEC Chair Gary Gensler called for increased regulations to adopt rules for decentralized crypto exchanges. In response, former Commodity Futures Trading Commission Chair Christopher Giancarlo argued that crypto regulation doesn’t fall under the SEC’s jurisdiction, as cryptocurrencies are commodities.
Judge Orders Ripple To Hand Over 1 Million Slack Messages To The SEC
Ripple is now required to produce terabytes of Slack messages to the SEC that were previously withheld due to an apparent data error.
United States Magistrate Judge Sarah Netburn has ordered Ripple to produce 1 million missing Slack messages among employees that the Securities and Exchange Commission has sought to access.
Despite Ripple’s protestations that complying would cost up to $1 million, the judge deemed the messages critical and unique evidence for the SEC’s ongoing case against the multi-billion-dollar company for selling unregistered securities.
The SEC filed a suit against Ripple Labs and its initial and current CEOs, Christian Larsen and Bradley Garlinghouse, for selling XRP as an unregistered security on Dec. 20.
According to Law360, in the original motion to compel Ripple from Aug. 9, the SEC argued that the messages among Ripple employees were “relevant to the parties’ claims and defenses and proportional to the needs of the case.” It also said that Ripple should deliver all messages from 22 email custodians in addition to the Slack messages.
Last month, the SEC told Judge Netburn that the Slack messages Ripple produced appeared to be incomplete. Ripple initially denied this claim but revised its statement by claiming it was a data processing mistake that resulted in the company only producing a small amount of the relevant messages and that more than 1 million messages were missing.
The SEC contended that Ripple’s failure to produce the complete Slack records was “highly prejudicial,” given those messages the SEC had received showed the remaining would be highly relevant:
“These messages include: (a) discussions about Ripple’s desire to create speculative trading in XRP, (b) the effect of Ripple announcements and efforts on, and Ripple’s concerns as to, the price of XRP, the relationship and central importance of XRP sales to Ripple’s overall business, and (d) the regulatory status of XRP.”
Ripple argued that it was unfair and unreasonable to produce the messages at a cost of up to $1 million over many months. Judge Netburn responded that the cost to Ripple in producing the messages was outweighed by their importance to the case.
“Any burden to Ripple is outweighed by its previous agreement to produce the relevant Slack messages, the relative resources of the parties, and the amount in controversy,” Judge Netburn said.
Ripple’s Legal Brawl With SEC Could Help Settle When Cryptocurrencies Are Securities
An SEC win would boost its case to regulate much of the crypto market, while a loss would reinforce calls for clearer laws
The booming cryptocurrency sector’s complaints that Washington has gone too far in cracking down on its unregulated products are getting tested in a key lawsuit targeting Ripple Labs Inc. and its digital coin, XRP.
The lawsuit, which the Securities and Exchange Commission filed in the waning days of the Trump administration, faces several hurdles in the coming months.
A Manhattan federal judge has been asked to decide, for instance, whether Ripple can argue regulators should have clearly announced which digital assets they oversee, rather than using enforcement actions to bring the industry to heel.
The SEC says Ripple illegally raised almost $1.4 billion by selling XRP in violation of investor-protection rules, while its co-founder and chief executive, whom it also sued, reaped hundreds of millions of dollars in trading gains.
The company says XRP is used for making international payments and isn’t an investment to be overseen by the SEC. Some XRP sales occurred before the SEC first said in 2017 that many cryptocurrencies should follow laws written to shield investors from fraud and misleading hype.
Despite the SEC’s 2017 guidance, thousands of digital coins have been sold in recent years without regulatory oversight. The SEC has brought enforcement actions against 56 token issuers, according to Cornerstone Research, but almost all settled with the SEC without going to court, where the regulator’s legal arguments could be tested by a judge or jury.
An SEC win would boost its case to impose investor protections on most of the $2 trillion crypto market, while a loss would reinforce the industry’s call for Congress to write clearer and more suitable laws.
“Either way, we are going to have an opinion that would be used by other players in the space to inform how they act and decisions that they make,” said Katherine Dowling, general counsel of Bitwise Asset Management, which manages several funds that hold cryptocurrencies.
Regulators have said just a handful of digital assets, such as bitcoin, are commodities mostly exempt from federal regulation. In contrast, XRP’s usefulness as a currency “never materialized,” the SEC says. Ripple touted XRP’s commercial use but didn’t disclose that it paid a money transmitter to accept the coin.
The money transmitter sold the digital coins, which gave the appearance that XRP was in greater demand, according to the SEC.
Ripple, whose defense attorneys include former SEC Chair Mary Jo White, has litigated aggressively. Early in the case, it sought records from the SEC that might have shown whether the regulator had allowed its staff members to trade XRP. A judge denied the request.
It also sought emails from within the SEC that might show regulators to be uncertain or divided over which tokens fall under their oversight. A federal magistrate judge in January said Ripple and its executives were entitled to some records from the SEC, but also allowed the agency to keep much of its thinking under wraps.
Ripple says its claim that the SEC has been cagey about which crypto assets it regulates supports its argument that it lacked fair notice about XRP’s status. The case, which might not go to trial until next year, has been closely watched because many crypto companies insist regulators should update regulations for digital assets, rather than use lawsuits to enforce rules written in the 1930s.
The SEC has asked a judge to block the fair-notice defense, saying the company had warnings about XRP’s status as a security. Ripple got U.S. legal advice as early as 2012 that XRP could be deemed an investment that would require SEC oversight, according to the agency’s court complaint.
Part of Ripple’s argument relies on a senior regulator’s statement in 2018 that ether, the world’s second-most-valuable cryptocurrency, isn’t a security. Ripple argues that market participants saw William Hinman’s speech as a public notice that digital coins could avoid classification as a security.
The XRP cryptocurrency is more like ether than digital tokens the SEC has previously targeted, according to Ripple. Both are decentralized, meaning they are maintained by a network of users and not a single company. Mr. Hinman has since left the agency, and SEC lawyers have said his view wasn’t an official position of the agency. Mr. Hinman declined to comment.
The SEC was told in January to share drafts and emails related to Mr. Hinman’s speech with Ripple. The SEC has indicated it will ask the judge to reconsider her decision.
Ripple Chief Executive Brad Garlinghouse earned almost $160 million from 2017 to 2020 selling XRP he received from the company. Co-founder Christian Larsen, who was CEO until 2016, earned $450 million from XRP sales between 2015 and 2020, according to the SEC, which included his wife’s sales in the total.
Messrs. Larsen and Garlinghouse have asked the court for early dismissal of the SEC’s complaint against them. The SEC doesn’t have jurisdiction because their XRP was sold to overseas buyers, they say, adding that the regulatory uncertainty surrounding digital assets means the executives’ actions on behalf of Ripple weren’t reckless.
“We believe the record is clear that XRP is not a security and that the SEC does not have jurisdiction over this matter,” said Martin Flumenbaum, an attorney at Paul, Weiss, Rifkind, Wharton & Garrison LLP, who represents Mr. Larsen.
Ripple’s duel with the SEC has influenced its agenda in Washington, with the firm lobbying Congress to consider a bigger role for other federal agencies such as the Commodity Futures Trading Commission.
The company spent almost $1.1 million last year on lobbying, including backing legislation that would create a way for crypto companies to choose supervision by the CFTC. The SEC has argued in court papers that Ripple’s lobbying efforts fueled any confusion about XRP that might have existed.
“Trying to squeeze digital assets, which are more akin to commodities than securities, into a securities regulatory framework simply doesn’t work,” said Stu Alderoty, Ripple’s general counsel. “All roads don’t lead to the SEC, because the SEC doesn’t have a rational regulatory framework.”
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