When is a currency not a currency? When it's deemed a security but the U.S. Securities and Exchange Commission, apparently.
The price of cryptocurrency XRP plunged again on Wednesday after the SEC 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.
The SEC alleges that Ripple 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.
XRP was down nearly 28% at less than 31 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.