After the probe from the US Securities and Exchange Commission (SEC), it appears that Ripple Labs’ troubles are only increasing. As the industry is keeping a close eye on how things progress, some companies have opted to preemptively cut their ties with XRP, the company’s token. This week, one of the top asset management firms in the crypto industry, Bitwise Asset Management announced that all their shares of the Bitwise 10 Crypto Index Fund had been liquidated. The investment firm explained in a press release that they had chosen to divest all of their XRP holdings, in accordance with their policy of not investing in the assets that could be considered securities under federal laws.
The crypto fund had been launched by Bitwise in 2017 for improving exposure to digital assets for institutional investors. It remains unclear as to what percentage of the fund comprised of XRP tokens, but it has been entirely liquidated. The news comes after the allegations against Ripple Labs by the SEC for engaging in unregistered securities by offering tis XRP token. The case was unveiled on Tuesday and the agency said that XRP should be categorized as a security, meaning that the $1.3 billion raised as capital by Ripple from the asset was completely illegal.
It was further alleged by the SEC that the token had been distributed by Ripple for ‘labor and marketing services’. The co-founder and CEO of the company, Chris Larsen and Brad Garlinghouse, were also named in the suit, as the SEC alleged that they hadn’t registered XRP sales that were around $600 million. The Director of the Enforcement Division of the SEC, Stephanie Avakian, said that due to these actions, potential purchases were deprived of Ripple’s and XRP’s business and other long-standing protections that are necessary for a robust public market system.
If the suit turns out to be successful, XRP will be classified as a security and it will be subjected to securities regulations moving forward. Garlinghouse, Larsen, and Ripple Labs could face civil penalties and disgorgement. Ripple and Garlinghouse both have publicly claimed that they will be fighting the lawsuit. A Wells submission had recently been published by the company, claiming that the SEC wanted to pick XRP as a security. It also said that the fact the agency was coming after XRP, instead of Ether and Bitcoin, indicates that it was attacking customer-friendly operations and innovations in the United States.
Nonetheless, a lot of companies have decided to pull their support for XRP and abandoned the company. This week, three exchanges including New York-based Cross Tower, Chicago-based Beaxy and Hong Kong-based OSL all announced that they would delist XRP from their respective platforms and all activities related to it will be halted. A partner at Anderson Kill, a law firm based in New York, Hailey Lennon also said that more exchanges could make similar moves. She said that a win for the SEC was going to affect the exchanges that had listed the token.