Law enforcement officials are Divided over XRP

If Ripple had previously dreamed of conducting an initial public offering (IPO), those hopes seem dashed and distant, at least for now.

SEC looking for a settlement?

Last year, CEO Brad Garlinghouse hinted that he was considering an IPO for Ripple. These plans were bolstered by the fact that the fintech company had raised $ 200 million in venture capital funding by then, led by Tetragon. Now, in an unfortunate turn of events, Tetragon, which previously led Ripple’s capital raising round, has sued it, demanding a refund of its investment.

Many also delisted the XRP token, including Coinbase, after the SEC lawsuit. The Securities and Exchange Commission said that XRP, previously ranked third among cryptocurrencies by market capitalization, was a security, not a commodity like Bitcoin and Ether.

This led to the SEC accusing Ripple Labs of conducting transactions in unregistered securities worth $ 1.3 billion, and the lawsuit also involves executive directors Chris Larsen and Brad Garlinghouse. The charges were made based on the fact that XRP meets the Howie test, which is used to determine whether an asset should be considered a security based on whether the investment and profit depend on the efforts of a third party.

While tensions are rising as the pretrial trial date is set for February 22, many lawmakers are voicing opinions on the issue, which at the moment seems highly uncertain.

According to lawyer Jeremy Hogan, it is most likely that the SEC’s lawsuit will lead to a settlement of the dispute and a large fine for Ripple. He hints that the lawsuit may have been the result of the SEC’s desire to regulate the entire cryptocurrency industry, although it looks like an attack on the entire crypto space, which the Ripple CEO has previously accused the Commission of.

In addition, Hogan mentioned that the SEC did not file a formal statement with the court that XRP is a security, which made the idea of a settlement more plausible as a solution. In addition, the release of the XRP token from escrow may be regulated by the SEC if XRP sales are restricted.

While Hogan appears to have sided with Ripple, others say there are clear indications that the company is committing securities fraud in line with the SEC’s allegations.

SEC lawsuit over classification of XRP as securities

Stephen Pally, a partner at law firm Anderson Kill, told the Wall Street Journal that the complaint demonstrates a pattern of how Ripple manages XRP as securities. He cites the fact that earlier decisions taken by the SEC against Kik and Telegram regarding unregistered securities will be an obstacle for Ripple.

Arca’s director of legal Affairs, Phil Liu, also supports Hogan. He said that Ripple does not seem to have stable revenue streams beyond selling XRP, and that the financial products it has developed are completely unsuitable to support the operation. Liu added that he believes XRP will remain a “relic of history” by the end of 2021.

Gary Gensler, a prominent figure in the cryptocurrency industry, was appointed by the Biden administration to serve as chairman of the Securities and Exchange Commission. While there has been speculation that a change of leadership at the SEC could change the outcome of the lawsuit, it is still unclear whether this will be true.

Source: https://news.bit.team/law-enforcement-officials-are-divided-over-xrp/

Official website: bit.team

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