SEC says third-largest cryptocurrency was sold all wrong

Illustration by Alex Castro

Ripple, its former CEO and founder Christian Larsen, and its current CEO Bradley Garlinghouse are being sued by the US Securities and Exchange Commission. The SEC says that they raised more than $1.3 billion through an unregistered securities offering.

The suit claims that Ripple violated securities laws by selling XRP, which The Wall Street Journal calls “the third-largest cryptocurrency by market value,” over a seven-year period starting in 2013. According to the complaint, the “illegal securities offering” created an information asymmetry that let Larsen and Garlinghouse sell XRP to investors who only knew what Larsen and Garlinghouse chose to tell them.

At the heart of the suit is a basic question about XRP: is it a security or a…

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