|Headquarters||San Francisco, CA|
|Key People||Brad Garlinghouse, CEO; Chris Larsen, Executive Chairman and Co-Founder; Jed McCaleb, Co-Founder, former member of Ripple's board of directors; Amir Sarhangi, Vice President of Products|
- 1 Background
- 2 Company news
- 3 SEC litigation
- 4 Products and services
- 5 Key People
- 6 References
Ripple was founded by Jed McCaleb and Chris Larsen in 2012. Larsen was a co-founder of the digital financing company E-LOAN Inc. and is currently one of the richest people in the world. McCaleb is the creator of the now-defunct bitcoin exchange Mt. Gox. He later founded Stellar in 2014.
Brad Garlinghouse is the current CEO of Ripple. He moved into this position in 2016 when Chris Larsen stepped down from the role. Garlinghouse joined Ripple in late 2016. He was personally appointed by Larsen, who then transitioned to serving as executive chairman of Ripple's board of directors.
Ripple's protocol was built upon co-founder Larsen's E-Loan, which was founded in 2004. In 2011, Jed McCaleb began working on the Ripple protocol. The company was officially founded in 2012 by McCaleb and Larsen through OpenCoin, another company started by McCaleb and Larsen.
Unlike many companies responsible for the creation of decentralized digital assets and decentralized payment systems, Ripple representatives have long said that Ripple's goal is to work with banks, rather than eschew them, in order to create the means for currency to move more freely in international markets.
According to Ripple's website, the company was founded to provide cryptocurrency and blockchain-based fintech solutions to challenges within the traditional financial system, to enable "the world to move value like it moves information today." At the "Unbound London 2018" smart money and blockchain conference, Ripple's global payments specialist Cassie Craddock told audience members that Ripple's long-term goal is to provide its users with the ability to make payments across international borders in 3-5 seconds.
In October 2018, Ripple announced that Amir Sarhangi, former director of product management and partnerships for Google's messaging service, had joined Ripple as its vice president of products. Sarhangi joined the company to help develop RippleNet.
In February 2019, a spokesperson on behalf of Ripple said that the company had removed the role of chief market strategist from their company. Cory Johnson, the former Bloomberg TV anchor who previously occupied the role, left the company. The Ripple spokesperson said that Johnson's role at Ripple was primarily to develop the company's internal strategy and help educate the industry about the differences between Ripple and XRP - in that, they said, Johnson's time with Ripple was fruitful.
In July 2019, Ripple released its Q2 quarterly report, which said that the company's sales had increased 48 percent, reaching $251 million in sales. The report also said that Ripple would proceed into Q3 with a more "conservative" approach to XRP sales, focusing on programmatic sales.
On December 20, 2019 Ripple announced $200 million in new funding from a Series C round that included Tetragon, SBI Holdings and Route 66 Ventures as investors. The company said that it had accelerated its momentum during 2019. In Q1 of 2020, Ripple reported an 87% drop in sales compared to the previous quarter, selling only $1.75 million compared to $13.08 million in Q4 2019.
In December 2020 Sandie O'Connor, former chief regulatory affairs officer for JPMorgan Chase, joined Ripple's board of directors. Her addition to the board was reportedly so that she could "provide counsel on 'government relations and regulatory initiatives.'"
In January 2021, news broke that former Ripple advisory board member Michael Barr, who joined the board in 2015 and left at an undisclosed time, was likely to be named head of the Office of the Comptroller of the Currency (OCC) under the administration of president Joe Biden.
Ripple contracted the Washington, D.C.-based lobbying firm Klein/Johnson to lobby the U.S. Congress, the Internal Revenue Service, the Securities and Exchange Commission SEC, and other, similar organizations then involved in building regulatory frameworks in the blockchain space. The lobbyist also agreed to be paid, in part, in XRP - the announcement specified the firm would receive a monthly fee of $25,000 in USD, as well as 10,000 XRP.
In June 2019, Ripple announced that the company had signed a deal with Coinfirm, a regtech startup, in order to provide AML information about its users. Among the information Coinfirm would provide were details about a quantity of XRP being traded had, at some point, been processed by a "mixer" - an online service designed to launder cryptocurrency by privately exchanging funds from multiple counterparties - or whether the cryptocurrency had come from a known theft or hacking attack. This would potentially make XRP compliant with AML guidelines of the Financial Action Task Force (FATF).
In April 2021, Ripple acquired a 40 percent stake in Tranglo, one of the largest cross-border payment firms in Southeast Asia.
RippleNet, Ripple's blockchain-based financial network, of banks corporations and financial institutions includes Banco Santander, Zip Remit, the National Bank of Kuwait (NBK), Cuallix, the Bank of England, Barclays, and Bank of Montreal (BMO). As of mid December 2019, Ripple said that RippleNet had grown to more than 300 customers worldwide. It should be noted that this does not necessarily reflect adoption of xCurrent and/or xRapid by these organizations, only their membership with the network. This can indicate a wide range of utilization of Ripple's technology, from testing its capabilities in closed pilot programs to full adoption...though Zip Remit and Cuallix are currently the only RippleNet members that have begun using both xCurrent and xRapid for their businesses.
In September 2018, Ripple announced that the National Commercial Bank (NCB) in the Kingdom of Saudi Arabia had joined RippleNet. The bank announced that this partnership would be part of an ongoing attempt to experiment with digital currency trading and regulation, including the eventual issuance of a digital currency for improving cross-border transactions between Saudi Arabia and the United Arab Emirates. The NCB plans to use Ripple's platform to make similar cross-border payments with banks all over the world. Later that month, PNC Bank, the 9th largest bank in the U.S. by assets, announced that they had joined RippleNet. Days after the news, XRP's market cap overtook that of Ethereum, making it the largest digital currency in the world by market cap; its price also increased more than 50 percent in a matter of hours.
In February 2020, local Egyptian news network Youm7 reported that the National Bank of Egypt (NBE) had joined RippleNet for remittances, seeking faster and cheaper methods for executing cross-border payments. Later that month, Ripple added South Korean fintech firms Sentbe, Hanpass and WireBarley to RippleNet. All three firms offer money transfer services to their customers in the Philippines, Indonesia, and Vietnam - as well as other Southeast Asian countries - in addition to South Korea.
On June 17, 2019, Ripple announced that it was partnering with MoneyGram to use Ripple's xRapid for international payments in conjunction with an investment by Ripple into MoneyGram. Under the agreement, Ripple was to acquire up to 10% of MoneyGram stock at $4.10 per share. XRP is used by xRapid to facilitate the transfers across border and the cooperation between the forms is designed to speed adoption of the cryptocurrency. The MoneyGram share price at the time of the announcement was about $1.45.
MoneyGram, a publicly traded U.S. company, said in in its Q1 2020 financial report that it had received $16.6 million in incentive payments from Ripple for the quarter. MoneyGram reported a total of $11.3 million in payments for the second half of 2019.
The price of XRP crashed after MoneyGram announced February 22, 2021, that the firm had “suspended trading on Ripple's platform” due to the SEC's lawsuit against Ripple. In its Q4 2020 business review, MoneyGram wrote a statement saying, “the Company is not planning for any benefit from Ripple market development fees in the first quarter. Due to the uncertainty concerning their ongoing litigation with the SEC, the Company has suspended trading on Ripple's platform. In the first quarter of 2020, the Company realized a net expense benefit of $12.1 million from Ripple market development fees.”
On March 8, 2021 Garlinghouse tweeted that the agreement with MoneyGram had come to an end: "Today, we’re announcing that Ripple and MGI have together decided to wind down our current partnership agreement, and are both committed to revisiting it in the future."
XRP community threatens fork
In late August 2019, the XRP community expressed anger over Ripple selling XRP to its clients to fund investments. One Twitter user made a post suggesting that the community should fork XRP "so we don't have to deal with the founders dumping." A petition was circulated on Change.org that secured almost 3,000 signatures, demanding that Ripple stop "dumping" XRP. Twitter user CryptoBitlord wrote to Brad Garlinghouse and Ripple CTO Joel Katz that they had 60 days to stop "dumping" XRP, "or we will stage a community takeover. If it's a decentralized network like you say, we have the power to do it." Garlinghouse defended Ripple's token sales, saying that the company "decreased our sales by volume quarter on quarter and since then the inflation rate of XRP circulating supply has been lower than that of bitcoin and ether."
Elliptic, a U.K.-based provider of anti-money laundering software as well as investigative services, said in a November 20, 2019 report that it had found more than $400 million worth of suspicious activities involving XRP. This represented less than 0.2% of the total number of transactions over the period observed. Since banks are Ripple's principal target market for XRP, the amount of suspicious activity could be troubling. According to a Ripple spokesperson, “Like other cryptocurrencies, XRP is open source and decentralized – it’s available to anyone to use. Ripple enabled XRP transactions are secure and through regulated institutions.”
"Buy & Hold Ripple" group
In the aftermath of the Reddit-coordinated price pump for the stock of GameStop, which rose more than 1,000 percent over a few days in late January 2021, a group called Buy & Hold Ripple emerged on the Russian messaging app Telegram. The Ripple (XRP) price recovered all of the loss it had sustained after the SEC filed its lawsuit aginst the company in late December 2020.
In 2014, Jed McCaleb left his position at Ripple, though he maintained a seat on its board of directors for a short time. In 2015, Ripple became involved in a legal battle with McCaleb, which also involved his new company Stellar, as well as the London-based cryptocurrency exchange Bitstamp. The dispute began when McCaleb and two of his family members attempted to sell a certain amount of XRP on Bitstamp, which Ripple claimed violated a legal agreement between Ripple and McCaleb. Bitstamp froze the XRP in response, claiming they couldn't confirm the true owners of the cryptocurrency involved in the transactions. The lawsuit was settled in 2016. As part of the agreement, McCaleb received the full amount of the funds that were originally frozen, and Ripple had to pay Bitstamp's legal fees.
In June 2017, Brad Garlinghouse attempted to terminate a contract Ripple had made with crypto consortium R3 via email to R3's chief executive David Rutter. The agreement gave R3 the right to purchase up to 5 billion XRP digital tokens at $0.0085 until September 2019. R3 responded by filing a lawsuit against Ripple, which then filed its own lawsuit against R3, claiming R3 had violated the contract by failing to help Ripple promote its technology. Ripple's attempts to keep the lawsuit in San Francisco courts were denied. R3 appealed to courts in Delaware and Manhattan, New York; the case was thrown out in Delaware.
YouTube giveaway scams
XRP has been (and continues to be) used in multiple giveaway scams based on YouTube. The scams involve users creating videos that use Ripple’s logos and the likeness of its CEO Brad Garlinghouse. Ripple sued the video platform in April 2020, alleging the platform’s “willful blindness” of such scams led to their proliferation on YouTube. YouTube filed a motion in July to dismiss these allegations, which Ripple contested in September.
Civil claims against Ripple
Ripple fought multiple claims alleging that the company misrepresented the nature of XRP to investors, including its status as an investment and thus that Ripple held unregistered securities sales by selling XRP to investors. In October 2020, Judge Phyllis J. Hamilton of the U.S. District Court of Northern California granted a motion by Ripple's representatives to dismiss several claims against Ripple, but refused to dismiss the case altogether.
In January 2021, a class-action lawsuit was filed in the Middle District Court of Florida. The lawsuit alleged that Ripple sold "millions of dollars (or more)" of XRP without registering it as a security with either federal or Florida state authorities. The lawsuit was filed by Florida resident Tyler Toomey, who claimed that he owned 135 XRP in November 2020 and sold it at a 50 percent loss in December 2020. Despite these losses being relatively minor (Toomey's holdings were worth approximately $100 in November 2020), the lawsuit said that the "Plaintiff seeks to represent a class defined as all persons or entities in the State of Florida who purchased XRP."
In an interview with Fortune in October 2020, Ripple's Executive chairman Chris Larsen said that Ripple might move overseas, as the company had become increasingly frustrated with the "hostile" attitude of Federal regulators - particularly the SEC - against digital assets and cryptocurrency. In an interview on Bloomberg Television, he named Japan and Singapore as the company's top choices for countries to move to based on the clarity of their regulations related to digital asset products. He also said that Switzerland, the U.K. and the United Arab Emirates were potential choices.
After years of widespread speculation about whether XRP constituted investment contracts under U.S. law, Garlinghouse told Fortune on December 21, 2020 that the SEC was about to sue Ripple, Larsen and himself in the coming days for issuing unregistered securities. The agency did file a suit against Ripple, Larsen and Garlinghouse in U.S. District Court for the Southern District of New York the next day. According to the head of the SEC's enforcement division, Stephanie Avakian, "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."
On December 28 and 29, 2020 Coinbase and Bittrex announced they would de-list XRP from their trading services in mid-January of 2021. Bittrex said it would de-list XRP on January 15 and Coinbase said XRP trading would end January 19. Days later, Binance.US and Genesis Trading made similar announcements, though in Gensesis' case, the company announced it would "suspend" trading, not permanently de-list it necessarily, and that it was "actively monitoring the evolving regulatory situation with XRP." In the following week, several other cryptocurrency-focused companies unlisted XRP from their trading platforms or divested XRP from their holdings; on January 6, 2021, digital asset broker Voyager Digital announced that it would suspend XRP trading on Monday, Jan. 18, at 12:00 p.m. ET. On January 5, Grayscale Investments announced that the company would remove XRP from its large-cap cryptocurrency fund. On January 5, 2021 The Block reported that, according to data from market data firm Coin Metrics, the number of XRP "whales" fell by 8 percent over the past two weeks, as wallets with significant holdings of XRP sold off their shares.
In a letter dated January 25, 2021 outside counsel for Ripple filed a request with the agency for documents relating to the SEC's determination that Ether is not a security as well as correspondence between former SEC Chairman Jay Clayton and U.S. government officials regarding national security concerns about Chinese influence on bitcoin and Ethereum.
On January 29, 2021 Ripple filed its defense to the SEC's compliant. The 96-page response largely sidestepped the allegation that Ripple was an investment contract by emphasizing it use in commerce. The team representing Ripple includes Debevoise & Plimpton, whose lead attorney on the case is Mary Jo White, a former chairman of the SEC.
In April 2021, lawyers representing Chris Larsen filed a motion to dismiss the lawsuit against him.
April 2021 was a good month for Ripple's defense when federal Judge Sarah Netborn allowed Ripple's request to subpoena SEC internal documents regarding Ripple. The defense lawyers are looking for the criteria the agency uses to determine when a coin is a security. The company is also looking for evidence of discussions at the agency that compared Ripple favorably to bitcoin or showed Ripple otherwise is not a security. Also that month Judge Netburn turned down the SEC’s request to subpoena eight years of financial data from Garlinghouse and Larsen. Judge Netborn called the request "irrelevant" to the case.
Products and services
xCurrent is a platform designed to allow banks to communicate openly during the process of making payments between each other, especially when those banks lie across international borders, at lower cost than traditional systems. It is a software program that uses Ripple's blockchain-based system, Interledger. It does not directly utilize XRP. It includes four components:
Messenger: Messenger is a function that is used to transfer KYC, risk information, fee rates, financial exchange rates, and other data crucial for completing a transaction between banks. It also provides IDs for specific payments, allowing both banks participating in a transaction to query the transaction at any time.
Validator: Validator is a function which, using cryptographic hash functions, confirms the success or failure of a payment.
ILP Ledger: This component of xCurrent settles payments. While not exactly a distributed ledger itself, it uses Interledger uses a software protocol (similar to a smart contract) called ILP Ledger - a subledger - to bridge the gaps between different payment systems used by banks around the world. It also tracks information such as debits, credits, and liquidity between parties engaging in a transaction.
FX Ticker: The component of xCurrent that provides the exchange rate between two pairs of ledgers (ex: if the two banks engaging in a money transfer are U.S. and British banks respectively, then FX Ticker will display the exchange rate between the U.S. dollar and the British pound). FX Ticker also keeps track of the account, currency, and authentication credentials for every account on the ILP Ledger. It also coordinates money transfers on ILP Ledgers, ensures the validity of exchange quotes, and transfers the specified payment amount in a transaction to the ILP Ledger of the payee.
xRapid is the function of Ripple that exchanges one currency for an equivalent amount of another. Unlike xCurrent, xRapid uses XRP as an intermediary currency when transferring funds. For example: if someone in the U.S. wants to pay someone in the U.K. in pounds, they can use xRapid to send USD to the party in the U.K. by buying a certain amount of XRP - this amount is determined by the value of XRP at the time of the transaction, and the exchange rates of both USD and the British pound. The XRP that the U.S. party purchased is then used to purchase an equivalent amount of pounds, which are then transferred to the U.K. party's account. This can occur within seconds, and does not require intermediaries to facilitate the transaction.
xVia is a product designed to enable corporate Enterprise Resource Planning software (or ERPs), which manage and automate several integral functions of a business, to link up with Ripple's decentralized network. This allows companies who use such software to directly connect their automated processes to banks connected by Ripple.
- Brad Garlinghouse - CEO
- Chris Larsen - Executive Chairman, Co-Founder
- Jed McCaleb - Co-Founder, former member of Ripple's board of directors
- Amir Sarhangi - Vice President of Products
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