“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” according to Stephanie Avakian, Director of the Enforcement Division of the SEC.
In the complaint, the SEC noted that Ripple Ripple has earned $200 million from selling XRP to investors, while it only made $23 million through its software sales in 2019.
“In other words, the overwhelming majority of Ripple’s revenue came from its sales of XRP, and Ripple relied on those sales to fund its operations,” according to the = SEC.
Additionally, Ripple co-founder Chris Larsen earned $450 million from selling XRP. Its CEO Brad Garlinghouse profited $150 million from selling over 321 million of XRP.
SEC lawsuit represents “an existential threat to Ripple”
On several occasions, Garlinghouse reiterated that XRP is a decentralized digital currency and it is not a security. He argued that XRP is not a stock or security. Ripple did not sell an investment contract and investors who purchased the cryptocurrency don’t share any profit from XRP sales.