The price of cryptocurrency XRP plunged again on Wednesday after the Securities and Exchange Commission filed a lawsuit alleging that Ripple Labs, a blockchain company that supports the digital currency, sold more than $1 billion of XRP virtual tokens without registering with the agency.
XRP was down more than 30% at less than 34 cents on Wednesday, according to data from cryptocurrency market site CoinDesk. The virtual currency fell as much as 17% on Tuesday after Ripple proactively announced the expected legal action and said it would fight it.
The SEC on Wednesday formally sued Ripple, alleging that its co-founder Christian Larsen and CEO Bradley Garlinghouse “created an information vacuum” that allowed them to sell XRP into a market that only had information they chose to share.
According to the SEC's lawsuit, the duo ignored legal advice that the cryptocurrency could be considered an investment contract and therefore was a security.
“From a financial perspective, the strategy worked,” raising at least $1.38 billion “over a years-long unregistered offering of securities,” the SEC said. “Ripple used this money to fund its operations without disclosing how it was doing so, or the full extent of its payments to others to assist in its efforts to develop a ‘use’ for XRP and maintain XRP secondary trading markets.”
Larsen and Garlinghouse both fervently have denied the SEC's allegations, publicly arguing that XRP is a currency and should not have to be registered with the SEC as an investment contract. The company has also questioned the lawsuit’s timing - SEC Chairman Jay Clayton is soon to step 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 on Wednesday to tether - a dollar-pegged token investors often use to trade crypto — with tether surpassing it in value, according to CoinMarketCap data.
Even so, XRP has still more than doubled in value this year, with a market value of about $21 billion.
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