Kraken has become the latest crypto exchange to drop XRP following the lawsuit filed by the U.S. Securities and Exchange Commission.
The SEC considers the native token on the Ripple network to be a security as opposed to a cryptocurrency. It therefore decided to file an action against Ripple Labs Inc. and two of its executives, alleging that they raised more $1.3 billion through an unregistered securities offering.
Binance, CrossTower and Beaxy all froze XRP in response to the lawsuit, and Coinbase officially suspended XRP trading on January 19. Now Kraken is the latest major cryptocurrency exchange to follow suit.
The freeze only applies to U.S. residents. Traders in other countries can continue to buy and sell XRP, but the market for the coin has now decreased significantly and that could cause the price to plummet further.
“Given the recent SEC filing against Ripple Labs Inc., we are halting XRP trading for U.S. residents no later than January 29,” it said in a statement. “We may begin implementing this process at any time on January 29, 2021, so all U.S. clients are strongly encouraged to resolve their positions prior to that day.”
XRP has lost around 60% of its value since the SEC announced charges against Ripple Labs, executive chairman Christian Larsen and chief executive Brad Garlinghouse on December 22.
It alleges that Garlinghouse and Larsen knew that the cryptocurrency had a little use case, yet proceeded with selling it for their own enrichment.
Garlinghouse revealed that Ripple Labs tried to reach a settlement with the SEC before it filed the action, but it was unable to do so. A new administration has now taken over in Washington DC, and Garlinghouse said the firm would try to continue to seek a resolution.
However, the SEC was recently victorious in legal battles with Telegram and Kik regarding their initial coin offerings, and it says it is trying to protect investors by clamping down on Ripple Labs.
“The registration requirements are designed to ensure that potential investors – including, importantly, retail investors – receive important information about an issuer’s business operations and financial condition,” said Marc P. Berger, deputy director of the SEC’s Enforcement Division. “Here, we allege that Ripple and its executives failed over a period of years to satisfy these core investor protection provisions, and as a result investors lacked information to which they were entitled.”
The complaint seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.
Larsen founded Ripple Labs with Jed McCaleb, who left the business in July 2013 to work on Stellar (XLM). In 2018, it was revealed that McCaleb’s XRP token ownership was worth $20 billion, which made him the world’s 40th richest person at the time.
Earlier this week, McCaleb sold 28.6 million XRP tokens, worth more than $8 million. Larsen holds around a third of all XRP, while Garlinghouse also holds a significant amount.
Garlinghouse said the San Francisco-based firm will soon issue a response to the SEC action, and the U.S. District Court of the Southern District of New York has ordered it to meet the SEC for a pretrial conference on February 22.