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(Reuters) — The U.S. Securities and Exchange Commission (SEC) on Tuesday charged Ripple, the blockchain payments company associated with the cryptocurrency XRP, with conducting a $1.3 billion unregistered securities offering.

The SEC also charged two executives of San Francisco-based Ripple for personal gains they received from the offering.

Ripple created and sold XRP, the third-biggest cryptocurrency by market value.

Globally, financial regulators are still assessing how they should regulate cryptocurrencies like Bitcoin and its rivals. Future court battles could determine whether cryptocurrencies make the leap from a niche to a mainstream asset.

Ripple has said XRP is a currency and does not have to be registered as an investment contract.

“The SEC is fundamentally wrong as a matter of law and fact,” the company said on Tuesday.

Beginning in 2013, Ripple’s former CEO, Christian Larsen, and its current CEO, Bradley Garlinghouse, raised capital through the sale of digital assets in an unregistered offering.

The company also “distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services,” the SEC said, adding that Larsen and Garlinghouse personally profited to the tune of approximately $600 million from their unregistered sales of XRP.

Larsen and Garlinghouse criticized the agency’s “lack of a clear regulatory framework,” adding that they would fight the action.

“We are right and will aggressively fight — and win — this battle in the courts to get clear rules of the road for the entire industry in the U.S.,” Garlinghouse said in an emailed statement.

The SEC is seeking an injunction, disgorgement with prejudgment interest, and civil penalties from Ripple, the agency said, without specifying how much.

“Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution, and a secondary trading market, must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies,” SEC enforcement director Stephanie Avakian said in a statement.

(Reporting by Katanga Johnson in Washington and Alun John in Hong Kong. Editing by Leslie Adler and Matthew Lewis.)


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