Not A Blockchain
I did hold some XRP, back when I was still evaluating the crypto space for what was hot and what was not. I’ve been looking back at how I reduced my initial positions down to what I hold these days. I remember how low my information was at the time, but unless you have skin in the game, you won’t be able to care too much about underlying tech, in my opinion. That’s how it works with me, at any rate.
Too many retail investors buy into a dream, however, and it is on behalf of those types of low-info people that a body like the SEC is acting on behalf. Greed is a huge motivator – of course I want to get rich, and so should anyone else. But I can make informed decisions about blockchain and crypto, whereas the general retail market is pumped by slick marketing and self-generated ‘legitimacy’, and is plagued by complex scams, naturally.
People in the crypto-verse have long hated Ripple and XRP – it’s not even a blockchain! And who are the validators of this DLT? Why, Ripple are one of the main validators. Amusingly, so are many ‘institutions’. Seems legit. Isn’t.
To begin with, it’s important to understand the difference between XRP, Ripple and RippleNet. XRP is the currency that runs on a digital payment platform called RippleNet, which is on top of a distributed ledger database called XRP Ledger. While RippleNet is run by a company called Ripple, the XRP Ledger is open-source and is not based on blockchain, but rather the previously mentioned distributed ledger database.
RippleNet’s ledger is maintained by the global XRP Community, with Ripple the company as an active member. The XRP Ledger processes transactions roughly every 3-5 seconds, or whenever independent validator nodes come to a consensus on both the order and validity of XRP transactions — as opposed to proof-of-work mining like Bitcoin (BTC). Anyone can be a Ripple validator, and the list is currently made up of Ripple along with universities, financial institutions and others.
XRP Xmas Surprise
America’s Securities and Exchange Commission has filed an historic complaint against Ripple, and I think this is a good thing. Made me think back to the SEC’s halting of the TON project last year, now long forgotten.
Here’s the main complaint –
“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”
“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 SEC’s complaint, filed today in federal district court in Manhattan, charges defendants with violating the registration provisions of the Securities Act of 1933, and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.
Long Form Exit Scam?
Taken from the filing itself;
SECURITIES AND EXCHANGE COMMISSION : Plaintiff
– against : : RIPPLE LABS, INC., BRADLEY GARLINGHOUSE, :
and CHRISTIAN A. LARSEN, :
20 Civ. 10832 ECF Case Complaint
*Jury Trial Demanded*
- From at least 2013 through the present, Defendants sold over 14.6 billion units of a digital asset security called “XRP,” in return for cash or other consideration worth over $1.38 billion U.S. Dollars (“USD”), to fund Ripple’s operations and enrich Larsen and Garlinghouse. Defendants undertook this distribution without registering their offers and sales of XRP with the SEC as
required by the federal securities laws, and no exemption from this requirement applied.
- Because Ripple never filed a registration statement, it never provided investors with the material information that every year hundreds of other issuers include in such statements when soliciting public investment. Instead, Ripple created an information vacuum such that Ripple and the two insiders with the most control over it—Larsen and Garlinghouse—could sell XRP into a market that possessed only the information Defendants chose to share about Ripple and XRP.
- Ripple engaged in this illegal securities offering from 2013 to the present, even though Ripple received legal advice as early as 2012 that under certain circumstances XRP could be considered an “investment contract” and therefore a security under the federal securities laws.
- Ripple and Larsen ignored this advice and instead elected to assume the risk of initiating a large-scale distribution of XRP without registration.
- From a financial perspective, the strategy worked. Over a years-long unregistered offering of securities (the “Offering”), Ripple was able to raise at least $1.38 billion by selling XRP without providing the type of financial and managerial information typically provided in registration statements and subsequent periodic and current filings. Ripple used this money to fund its operations without disclosing how it was doing so, or the full extent of its payments to others to assist in its efforts to develop a “use” for XRP and maintain XRP secondary trading markets.
- Meanwhile, Larsen—Ripple’s initial chief executive officer (“CEO”) and current chairman of the Board—and Garlinghouse—Ripple’s current CEO—orchestrated these unlawful sales and personally profited by approximately $600 million from their unregistered sales of XRP.
- Garlinghouse did so while repeatedly touting that he was “very long” XRP, meaning he held a significant position he expected to rise in value, without disclosing his sales of XRP
- Defendants continue to hold substantial amounts of XRP and—with no registration statement in effect—can continue to monetize their XRP while using the information asymmetry they created in the market for their own gain, creating substantial risk to investors.
- By engaging in the conduct set forth in this Complaint, Defendants engaged in and are currently engaging in the unlawful offer and sale of securities in violation of Sections 5(a) and 5(c) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77e(a) and 77e(c)], and Larsen and Garlinghouse also aided and abetted Ripple’s violations of those provisions.
- Unless Defendants are permanently restrained and enjoined, they will continue to engage in the acts, practices, and courses of business set forth in this Complaint and in acts, practices, and courses of business of similar type and object.
NATURE OF THE PROCEEDING AND RELIEF SOUGHT
- The Commission brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)].
- The Commission seeks a final judgment: (a) permanently enjoining Defendants from violating Sections 5(a) and 5(c) of the Securities Act, pursuant to Section 20(b) of the Securities Act
[15 U.S.C. § 77t(b)]; (b) pursuant to Section 21(d)(5) of the Securities Exchange Act of 1934
(“Exchange Act”), (i) ordering Defendants to disgorge their ill-gotten gains and to pay prejudgment
interest thereon and (ii) prohibiting Defendants from participating in any offering of digital asset
securities; and (c) imposing civil money penalties on Defendants pursuant to Section 20(d) of the
Securities Act [15 U.S.C § 77t(d)].
Full SEC PDF
XRP Army = Crypto Loserthink
You see them on YouTube and everywhere else. The XRP army. Hodling off a cliff near you, blindly marching forward with nothing but faith in the leadership and marketing. This is the height of Mook behaviour.
If you self-identify with being in the XRP ‘army’, then you need to look long and hard at what the heck you think you’re doing. There’s nothing wrong with the desire to enrich oneself, in fact it’s a sign of a healthy human. But there is a lot wrong with buying magic beans down at the market. That is a dunce move. If you don’t know what it is, what it does, how it does it and who controls all of that, then you should reconsider why you are doing whatever you think you’re doing. If you hold XRP, you might want to reconsider.
If you have XRP on your cold storage Ledger wallet, then I guess you are having a particularly bad week.
Horrible Toast Wallet
I would like to take the opportunity to say how revolting the Toast wallet is/was and how I felt completely burned by their ‘you have to leave $20 of XRP in the wallet’ – this felt like the mugging rip-off that it was. I still want my money back. Looking deeper, I see [and now remember] that it’s a enforced rule of Ripple that their wallets do this. Urgh. Looking deeper still, Toast themselves are less than happy with the Ripple jokers.
- Toast Wallet has been removed from App Stores in protest at the abysmal treatment of community developers by Ripple. Existing Toast installs will continue to work and funds are safe. We await a clear and transparent community developer support programme from xPring.— Toast Wallet (@ToastWallet) June 18, 2020
- Toast wallet shutting down [June 21, 2020]
There is a technical word for all of this – that word is ‘shitshow‘.
I’m reading the Blockstack STACKS 2.0 whitepaper at the moment, and will be making a longer post about that soon. Blockstack were famously the first crypto token issuer to do so with SEC compliance last year in 2019 – and I noticed a recent update on STX.
I’ve been playing around with the Koinly service – very interesting and useful – and it’s made me look at my whole history with tokens. If you’re worried about your holdings, and whether or not you might be liable for tax in your country, it’s a great way to get a handle on your trading history, and if you need to, a great way to get your affairs in order. It’s free, unless you want to generate an actual tax report.