- Cryptocurrency XRP sank nearly 25% to around 35 cents Wednesday morning.
- The SEC is suing Ripple and two of its executives over the alleged sale of unregistered securities.
- Ripple denied XRP is a security and questioned the lawsuit's timing.
The price of XRP plunged again Wednesday after the U.S. Securities and Exchange Commission filed a lawsuit alleging that Ripple, a blockchain company with ties to the cryptocurrency, conducted a $1.3 billion unregistered securities offering.
XRP sank nearly 25% to around 35 cents Wednesday morning, according to data from cryptocurrency market site CoinDesk.
The virtual currency fell as much as 17% on Tuesday after Ripple said it anticipated and would fight the legal action.
The SEC is suing Ripple and two of its executives, CEO Brad Garlinghouse and co-founder Chris Larsen.
At the heart of the federal agency's complaint is the claim that XRP should be treated as a security — like a share in a company — rather than a currency.
"We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which 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.
Ripple denies this, stating that XRP is a currency and should not have to be registered as an investment contract.
The company questioned the lawsuit's timing — SEC Chairman Jay Clayton is soon to stand down — and said the U.S. government and other regulators had previously given XRP currency status.
XRP lost its place as the world's third-most valuable cryptocurrency, with tether — a dollar-pegged token investors often use to trade crypto — surpassing it in value Wednesday, according to CoinMarketCap data.
The "security" label matters because it could bring XRP under strict new rules, and this would heavily impact Ripple.
Ripple owns 55 billion of the total 100 billion XRP tokens in existence and even makes revenue from selling some of its XRP holdings each quarter.
XRP was created and distributed by the founders of Ripple in 2012, and is meant to facilitate fast cross-border money transfers.
The price of XRP has risen in tandem with bitcoin and other cryptocurrencies this year, however it is still down about 90% from its peak in late 2017.
The company Ripple was last privately valued at $10 billion and is backed by the likes of Japanese financial services giant SBI Holdings, Spanish bank Santander and top venture capital firms including Andreessen Horowitz, Lightspeed and Peter Thiel's Founders Fund.
Ripple had threatened to move its headquarters outside of the U.S. over a lack of regulatory clarity in the U.S., with London, Switzerland, Singapore, Japan and the United Arab Emirates tipped as potential locations.
Source: nbcdfw.com
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