Market manipulation is also a crime! The U.S. Securities and Exchange Commission (SEC) officially sues Ripple and two executives for selling $1.3 billion in unregistered securities and manipulating coin prices.

On the 22nd, it was reported that Ripple confirmed the U.S. Securities and Exchange Commission (SEC) will sue the company and has previously announced that the XRP token is not a security. In the early hours of today, the SEC officially issued a statement, accusing Ripple and two executives of selling $1.3 billion in unregistered securities.

Ripple's Top Executives Face Lawsuit

According to the complaint filed by the SEC, Ripple's co-founder and executive chairman, Christian Larsen, and CEO Bradley Garlinghouse have been accused of conducting unregistered securities offerings for the company in the United States and globally since 2013.

The document also alleges that Ripple issued billions of XRP tokens in exchange for non-cash considerations such as services and market-making. Larsen and Garlinghouse allegedly sold approximately $600 million of unregistered securities in personal sales. The complaint further claims that Garlinghouse continuously touted the value of XRP, unlawfully advertising it as an unregistered security.

The SEC states that Ripple failed to register XRP as a security and did not meet any exemptions from registration requirements, thereby violating U.S. securities laws.

SEC Lists Multiple Allegations

Stephanie Avakian, head of the SEC's enforcement division, stated, "Issuers seeking the benefits of a public offering, including access to retail investors and broad-based trading, must comply with the federal securities laws. Either the securities must be registered or exempt from registration."

She emphasized that Ripple did not comply, leaving purchasers without adequate disclosure and failing to meet the basic requirements for a healthy public market. Avakian noted that Ripple failed to inform retail investors about its operations and financial condition, thus failing to provide basic protections.

The complaint details Ripple's business practices with XRP, including its controversial "programmatic sales" method of systematically selling XRP and the later introduction of the On-Demand Liquidity (ODL) service, which only offers XRP for use in cross-border payment services.

For instance, the SEC accuses Ripple's co-founder Christian Larsen of establishing RippleWorks, funding it with a substantial amount of XRP to promote Ripple. However, RippleWorks allegedly recruited market makers who sold a significant amount of XRP to the public markets, totaling around $176 million, without safeguarding the investment value of XRP.

Additionally, the SEC alleges that Ripple paid others to maintain the utility of XRP and its performance in the secondary market. It accuses Ripple of devising pricing strategies and instructing market makers to achieve specific prices in the market. However, only partial market intervention was disclosed, leading to legal violations.

Ripple's Defense: XRP is Not a Security

Ripple's main arguments are as follows:

1. XRP is not an investment contract. Ripple claims that XRP holders do not receive shares or dividends from Ripple, nor do they have shareholder rights. Those who purchase XRP only receive the asset itself, with no further benefits. Most XRP holders have no relationship with Ripple.
2. Ripple has its own shareholders, and those wishing to invest in Ripple should buy Ripple's own stock.
3. The value of XRP is not tied to Ripple, but rather to the cryptocurrency market. While Ripple periodically sells XRP, it does so through exchanges or OTC dealers outside the U.S., and the sales are primarily for cross-border payment needs, accounting for less than one-thousandth of global trading volume. Ripple is attentive to price impacts.
4. XRP, like Bitcoin and Ether, is a currency, not an investment contract, and is not subject to regulation under ICO guidelines. It does not meet the securities definition of The Howey Test.
5. Not under SEC jurisdiction; oversight should fall under FinCEN for financial crime enforcement.

Ripple's arguments have drawn criticism from figures in the cryptocurrency industry. For example, Ripple claims that XRP's blockchain network is secure and decentralized, contrasting it with Bitcoin and Ether, which the SEC recognizes as currencies but have centralized blockchain networks controlled by China, making XRP supposedly superior.

This led Ethereum founder Vitalik to express dissatisfaction, directly mentioning Chinese Foreign Ministry spokesperson Hua Chunying in Chinese, stating, "Why haven't you given us orders yet? Should we fork Ethereum a bit with our main nodes?"

However, Japan's SBI Group continues to support Ripple, having previously introduced programs where shareholders can receive XRP as dividends and launched XRP-focused funds. SBI President Yoshitaka Kitao still expresses support for Ripple, believing that Ripple will ultimately prevail:

Most Cryptocurrencies Are Guilty

Renowned KOL JOE007 made a valid point in his commentary on the matter, stating, "People's reaction to this is, 'XRP is not a cryptocurrency, but the others are fine!' This completely misses the point."

He says, "Almost all 'junk coins' are handled in the same centralized manner in primary and secondary markets, as well as in news operations, community operations, and listings. It's just that they are not big companies."

From the SEC's perspective in this complaint, the issue is being an unregistered security. Whether you're supporting or dumping, without full disclosure to investors, it is illegal. Ripple CEO Bradley Garlinghouse has been vocal this year about the unfriendly U.S. regulatory environment, expressing a desire to leave the U.S., indicating that the SEC has been gathering evidence for quite some time.