Cryptocurrency XRP is down 25% after the SEC filed a lawsuit against Ripple

In this photo illustration, a visual representation of Ripple digital Cryptocurrency is displayed on January 30, 2018 in Paris, France.

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The price of XRP fell again on Wednesday after the US Securities Commission filed a lawsuit alleging that Ripple, a cryptocurrency-linked blockchain company, made an unregistered $ 1.3 billion bid. .

XRP fell nearly 25 percent to about 35 cents on Wednesday morning, according to data from the CoinDesk website on the cryptocurrency market. The virtual currency fell to 17% on Tuesday, after Ripple said it anticipates and will fight legal action.

The SEC is suing Ripple and two of its directors, CEO Brad Garlinghouse and co-founder Chris Larsen. At the heart of the federal agency’s complaint is the statement that XRP should be treated as a guarantee – as a share in a company – rather than as a currency.

“We allege that Ripple, Larsen and Garlinghouse failed to record their ongoing supply and sale of billions of XRPs to retail investors, which deprived potential buyers of adequate disclosures about the XRP and Ripple business and other important long-term protections. , which are fundamental to a robust public market system, “said Stephanie Avakian, director of the SEC’s Enforcement Division.

Ripple denies this, saying that XRP is a currency and should not be registered as an investment contract. The company questioned the timing of the lawsuit – SEC President Jay Clayton is due to step down soon – and said the US government and other regulators had previously granted XRP currency status.

XRP lost its place as the third most valuable cryptocurrency in the world, with tether – a dollar-denominated token that investors often use to trade crypto – surpassing it on Wednesday, according to CoinMarketCap.

The “security” label matters, as it could bring XRP under new strict rules, and this would have a strong impact on Ripple. Ripple owns 55 billion of the total of 100 billion existing XRP chips and even generates revenue from the sale of some of its XRP holdings each quarter.

XRP was created and distributed by the founders of Ripple in 2012 and is meant to facilitate fast cross-border money transfers. The price of XRP has risen in tandem with bitcoin and other cryptocurrencies this year, however it is still down about 90% from its peak at the end of 2017.

Ripple has recently been valued at $ 10 billion and is backed by Japanese financial services giant SBI Holdings, Spanish bank Santander and top venture capital firms, including Andreessen Horowitz, Lightspeed and Peter Thiel’s Founders’ Fund. .

Ripple had threatened to move its headquarters outside the US due to a lack of regulatory clarity in the US, with London, Switzerland, Singapore, Japan and the United Arab Emirates being located as potential locations.