We have carefully reviewed the complaint that the SEC filed in federal district court in New York alleging Ripple’s XRP should have been registered as a “security” upon its creation in 2012, more than eight years ago, and charging that Ripple and its senior managers later engaged in market manipulation and self-dealing. See reference here.
Please be advised that GateHub Ltd. will continue listing XRP until the SEC’s complaint against Ripple is adjudicated and a final decision entered that XRP is properly classified as a “security,” or until we receive a cease-and-desist notice from the SEC.
We have never believed that XRP is a “security” under the prevailing “Howey” test in the US, and regard XRP primarily as a “utility” token whose value is based on its use in payments and foreign exchange. Nor have we personally witnessed any improper market conduct by Ripple Labs or its senior officers. Our own business decision to list XRP -- and our attempt to build a payments business using XRP on the XRP Ledger -- reflects this good faith belief. We would not have proceeded to build a business within the XRP Ledger ecosystem if the SEC had issued any guidance whatsoever that XRP would be treated as an unregistered “security.” And we would have refused to do business with Ripple or anyone at Ripple who, in our judgment, engaged in fraudulent market practices.
Shortly after its development by Ripple’s founders in 2012, the software that drives the XRP Ledger was open-sourced and made available to developers free of charge, and is hosted on numerous third-party servers around the world. Similarly, the client-side software can be downloaded and used by end users on their own mobile phones or computers.
This is a “distributed” blockchain technology, and in theory, Ripple Labs could close tomorrow, but the ledger – and the recording of XRP transactions onto the ledger through the consensus process – would continue. If Ripple and/or its senior executives defrauded individual investors, they should be subject to appropriate enforcement actions, and be forced to disgorge any ill-gotten gains. But that is a far cry from an action by the SEC classifying XRP as a “security,” with potentially catastrophic consequences for individual investors, who did nothing wrong.
We remain optimistic about the future of XRP and hope that this litigation -- however disruptive in the short term -- will bring clarity to the appropriate treatment of cryptocurrencies under the US securities laws.