US SEC file lawsuit against a company of selling unregistered securities
The Securities and Exchange Commission charged Ripple Labs Inc. of raising over $1.38 billion by offering unregistered digital security (XRP)
The US-based Ripples Labs Inc. along with two of its executives were charged by the US Securities and Exchange Commission (SEC) of raising over $1.38 billion through the unregistered offering of digital security called XRP.
The SEC filed a lawsuit in this regard before a federal district court in Manhattan on 22 December 2020. Ripples Labs Inc. is a leading cryptocurrency and block chain firm.
The SEC charged Ripples Labs Inc., Christian Larsen, the company's former CEO and the current CEO of the company Bradley Garlinghouse with violations under Sections 5(a) and 6(c) of the Securities Act, 1933.
The complaint alleged that the company and its two senior executives raised funds since 2013 through illegal offerings of XRP to investors in the US and worldwide. The two senior executives were accused of pocketing approximately $600 million from their unregistered sales of XRP by orchestrating unlawful sales.
"Issuers seeking the benefits of a public offering must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies. We allege that Ripples, 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 and XRP and Ripple's business and other important long-standing protections that are fundamental to our robust public market system," Stephen Avakian, Director of the SEC's Enforcement Division said in a media statement.
In the lawsuit, the SEC said that the company created an information vacuum by failing to provide the investors with material information required while soliciting public investment. Ripple, Larsen and Garlinghouse sold XRP into a market possessing exclusively the information they shared about Ripple and XRP.
The SEC has sought injunctive relief, disgorgement with prejudgment interest and civil penalties in the lawsuit filed before the Manhattan district court.