The US Securities and Exchange Commission (SEC) filed a lawsuit Tuesday against Ripple Labs Inc., a leading cryptocurrency and blockchain firm, and two of its executives. The SEC alleges that Ripple raised over $1.38 billion through an unregistered offering of a digital asset security called “XRP.”

The SEC filed the complaint before a federal district court in Manhattan. It is charging Ripple, Christian Larsen, the company’s former CEO; and Bradley Garlinghouse, the company’s current CEO, with violations under Sections 5(a) and 5(c) of the Securities Act of 1933. The complaint alleges that Ripple, Larsen, and Garlinghouse raised funds since 2013 through illegal offerings of XRP to investors in the US and worldwide. The complaint also alleged that Larsen and Garlinghouse “orchestrated these unlawful sales and personally profited by approximately $600 million from their unregistered sales of XRP.”

Moreover, the SEC said that Ripple failed to file a registration statement and created an “information vacuum” by not providing the investors with material information required when soliciting public investment. Therefore, Ripple, Larsen, and Garlinghouse sold XRP into a market possessing exclusively the information that they shared about Ripple and XRP.

The following is the prayer sought in the petition:

I.
Permanently enjoining Defendants, and each of their respective agents, servants, employees, attorneys and other persons in active concert or participation with any of them, from violating, directly or indirectly, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. § 77e(a), 77e(c)], including by delivering XRP to any persons or taking any other steps to effect any unregistered offer or sale of XRP;
II.
Ordering Defendants to disgorge all ill-gotten gains obtained within the statute of limitations, with prejudgment interest thereon, pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)];
III.
Prohibiting Defendants from participating in any offering of digital asset securities pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)];
IV.
Ordering Defendants to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)]; and
V.
Granting any other and further relief this Court may deem just and proper for the benefit of investors.

See the COMPLAINT