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Class Action — SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering of XRP Digital Currency

On Tuesday, December 22, 2020 the U.S. Securities and Exchange Commission (“SEC”) announced that it had filed an action against Ripple Labs Inc. (“Ripple Labs”) and two of its executives alleging, inter alia, that they had raised over $1.3 billion through an ongoing unregistered securities offering via the sale of its digital asset XRP. Specifically, the SEC complaint alleges that beginning in 2013, Ripple Labs and its executives offered and sold billions of XRP in exchange for cash and non-cash consideration without complying with the registration provisions of the federal securities laws.

Ripple Labs

Class action Ripple XRP digital currency

The SEC’s announcement is the latest development in the regulation of offerings of digital assets, such as Bitcoin, Ethereum, and alternative digital assets (“altcoins”), such as XRP, and the laws applicable to those offerings. Following the SEC’s announcement, several U.S.-based digital asset exchanges —including Coinbase and Bittrex — announced that they would suspend trading of XRP on their trading platforms. The value of XRP fell significantly following the announcement of the SEC’s action and the announced suspension of XRP trading, and there are questions concerning the liquidity of XRP.

The SEC action and responses from digital asset exchanges highlight the need for investors to carefully weigh the risks regulatory uncertainty poses for digital assets in the U.S. It is unlikely that the SEC’s action against Ripple Labs and its executives will be the last of its kind.

If you traded in XRP on Coinbase or Bittrex or any other digital exchange and want to discuss your rights or how this may impact you, please contact Steven L. Bloch (sbloch@sgtlaw.com) or Ian W. Sloss (isloss@sgtlaw.com) at (203) 325-4491.

Steven L. Bloch is a partner and Ian W. Sloss is an associate at Silver Golub & Teitell LLP, a law firm with offices in Stamford, Hartford, Waterbury, and Danbury, Connecticut.