Quick Analysis of Ripple Lawsuit: Unlike EOS, Accusations Against Individuals are Unprecedented in the Crypto Community

Investor Katherine Wu from the U.S. venture capital firm Notation, with a legal background, has written numerous legal perspectives on cryptocurrency-related topics. She has shared her thoughts on the SEC's lawsuit as follows:

Past Cases: EOS, Kik Settlements

EOS, a cryptocurrency that set a record with a $4.1 billion ICO fundraising, and another cryptocurrency Kik, like XRP, had legal battles with the SEC. Katherine Wu had commented on the first two cases before, stating that the XRP case is more similar to the Kik case, where both were accused of "illegally conducting an initial coin offering (ICO)."

Ultimately, the SEC reached a settlement with Kik, where they paid a $5 million settlement and were not deemed a security and could continue to trade.

An Unprecedented Case in the Crypto Space: Individual Charges

Katherine Wu finds it surprising that the XRP lawsuit is the first time individuals have been charged, including Ripple's co-founder and executive chairman Christian Larsen, and CEO Bradley Garlinghouse, indicating joint responsibility with the company.

She notes that while creating a market is common in the crypto space, the severity of the allegations against Larsen and Garlinghouse for selling XRP without a practical use case from the start, and earning over $700 million through marketing and market-making, is significant.

The Outlandish Culture of the Crypto Space

Katherine Wu points out that there are certain things crypto investors need to pay attention to. Twenty percent of XRP is immediately allocated to senior executives without a lock-up plan, which she finds extremely concerning.

She mentions that such setups are unheard of in traditional institutional investment rounds but are prevalent in the crypto space.

Possible SEC Victory

Katherine Wu, not a lawyer herself, notes from the lawsuit's statute of limitations that there was no time limit set for this case as early as April 2019, giving the SEC ample time to pursue the lawsuit. She speculates that settlement discussions may have tragically failed.

However, she believes that spectators may be disappointed as the charges are related to selling unregistered securities, so there won't be any dramatic "arrests." She also suggests that such cases should allow for more debate and scrutiny.