Ripple Labs, Inc.
TypePrivate
IndustryComputer software
Founded2012[1]
FoundersChris Larsen
Jed McCaleb
Headquarters
San Francisco, California, U.S.
Number of locations
50 countries [2]
Area served
Worldwide
Key people
Ryan Fugger (Concept Originator)
Alan Safahi (Advisory Board)
David Schwartz (Chief Cryptographer and Chief Technology Officer)
Ken Kurson (Advisory Board)
Brad Garlinghouse (Chief Executive Officer)
ProductsRipple Payment and Exchange Network
Number of employees
1,120 (2023)[2]
Websiteripple.com

Ripple Labs, Inc. is an American technology company which develops the Ripple payment protocol and exchange network. Originally named Opencoin and renamed in 2015, the company was founded in 2012 and is based in San Francisco, California.[1]

History

Ryan Fugger conceived Ripple in 2004 after working on a local exchange trading system in Vancouver. The intent was to create a monetary system that was decentralized and could effectively empower individuals and communities to create their own money. Fugger later built the first iteration of this system, RipplePay.com. Concurrently, in May 2011, Jed McCaleb began developing a digital currency system in which transactions were verified by consensus among members of the network, rather than by the mining process used by Bitcoin. In August 2012, Jed McCaleb hired Chris Larsen and they approached Ryan Fugger with their digital currency idea. After discussions with McCaleb and long-standing members of the Ripple community, Fugger handed over the reins. In September 2012, Chris Larsen and Jed McCaleb co-founded the corporation OpenCoin.[3]

OpenCoin began development of the ripple protocol (RTXP) and the Ripple payment and exchange network. On April 11, 2013, OpenCoin announced it had closed an angel round of funding with several venture capital firms. That same month, OpenCoin acquired SimpleHoney to help it popularize virtual currencies and make them easier for average users.[4]

On September 26, 2013, OpenCoin officially changed its name to Ripple Labs, Inc.[1]

On May 5, 2015, Ripple received a US$700,000 (equivalent to $864,215 in 2022) civil money penalty from U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) for “willful violation of the Bank Secrecy Act by acting as a money services business without registering with FinCEN.”[5] On October 6, 2015, the company was rebranded from Ripple Labs to Ripple.[6]

On June 13, 2016, Ripple obtained a virtual currency license from the New York State Department of Financial Services, making it the fourth company with a BitLicense.[7]

In September 2017, R3 sued Ripple for specific performance of an option agreement in which Ripple agreed to sell up to five billion XRPs for a price of $.0085. Ripple countersued, claiming that R3 reneged on a number of contractual promises, and was simply acting in a spirit of opportunism, after the cryptocurrency increased in value more than 30 times. In September 2018, Ripple and R3 reached an undisclosed settlement agreement.[8]

In March 2018, a Japanese bank consortium led by SBI Ripple Asia, comprising 61 banks launched "MoneyTap", a Ripple-powered mobile app to provide on-demand domestic payments in Japan.[9] In May 2018, Spanish Banking group Santander released One Pay FX — the first mobile application for international payments powered by blockchain technology, that uses Ripple's xCurrent technology.[10] Following the creation of a Mumbai office, Ripple has been adding multiple Indian customers in 2018, including leading banks such as Kotak Mahindra Bank, Axis Bank, and IndusInd, that announced that they started using Ripple's products.[11]

On December 22, 2020, the U.S. Securities and Exchange Commission charged Ripple and two of its executives with violating investor protection laws.[12] The SEC alleged that Ripple, co-founder Christian Larsen and CEO Bradley Garlinghouse, raised more than $1.3 billion through an unregistered securities offering. The government agency brought charges against Ripple[13] for the fault of depriving the “potential purchasers [of XRP] of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” according to the complaint that the SEC filed in federal district court in Manhattan, New York.[14] In April 2021, Judge Sarah Netburn granted a motion from Garlinghouse and Larsen to dismiss the SEC's subpoenas for access to eight years' of banking records, referring to the request as a "wholly inappropriate overreach." The defendants have already agreed to turn over all data involving XRP transactions.[15]

In May 2023, Ripple acquired Metaco, a Switzerland-based crypto custody firm for $250 million. In addition to expanding its potential customer base, the purchase also expanded the company's international presence during a time of increased scrutiny by the SEC towards U.S. cryptocurrency companies.[16][17] In June 2023, Ripple received approval for a license from the central bank of Singapore to offer regulated digital payment token products and services.[18][19]

In July 2023, the district court issued its ruling on the SEC lawsuit and stated that the XRP token sold by Ripple Labs was not a security. However, if sold in institutional sales, or used as a fundraiser, such actions could be classified as a security in those circumstances. More specifically, the programmatic sale on cryptocurrency exchanges do not meet the third prong of the Howey Test, so subsequent sales by exchanges are not securities. Judge Analisa Torres issued a summary judgement in the case after over two years of litigation between the SEC and Ripple, so the case could subsequently go to a full trial, or be appealed.[20] In October, the SEC announced they will be dropping their lawsuit against Brad Garlinghouse and Chris Larsen.[21]

Funding round (securities offering)

Ripple is a privately funded company. It has closed five rounds of funding, which included two rounds of angel funding, one round of seed funding, one Series A round, one Series B round and one Series C round.[4]

Date Funding
type		 Investor Amount
(million $)
April 2013 Angel Andreessen Horowitz, FF Angel LLC, Lightspeed Venture Partners, Pantera Capital, Vast Ventures, Bitcoin Opportunity Fund 2.5
May 2013 Angel Google Ventures, IDG Capital Partners 3.0
November 2013 Seed Core Innovation Capital, Venture51, Camp One Ventures, IDG Capital Partners 3.5
May 2015 Series A IDG Capital Partners, Seagate Technology, AME Cloud Ventures, ChinaRock Capital Management, China Growth Capital, Wicklow Capital, Bitcoin Opportunity Corp, Core Innovation Capital, Route 66 Ventures, RRE Ventures, Vast Ventures, Venture 51 28
October 2015 Series A Santander InnoVentures 4
September 2016 Series B Standard Chartered, Accenture, SCB Digital Ventures, SBI Holdings, Santander InnoVentures, CME Group, Seagate Technology 55
December 2019 Series C Tetragon, SBI Holdings, Route 66 Ventures 200

Partnerships and initiatives

In March 2014, CrossCoin Ventures launched an accelerator which funds companies that work to advance the Ripple ecosystem. The firm funds accepted startups with up to US$50,000 (equivalent to $61,808 in 2022) in XRP, Ripple's native currency, in exchange for a 3% to 6% stake in diluted common stock. Mentorship and support is provided by CrossCoin and Ripple Labs, Inc.[22]

Ripple also developed early partnerships with companies such as ZipZap,[23] with the relationship called a threat to Western Union in the press.[24]

In cooperation with other industry leaders, Ripple Labs became a co-founding member of the Digital Asset Transfer Authority (DATA) in July 2013. DATA provides best practices and technical standards, including anti-money laundering compliance guidance for companies that work with digital currency and other emerging payments systems. The committee works as a liaison among public officials, businesses and consumers and create common rules to protect consumers. The initiative attempts to create a cohesive voice of Bitcoin community members when interacting with regulators.[25]

In 2018 Ripple donated a quantity of XRP valued at $29 million to USA public schools.[26]

In March 2019, Ripple announced a $100 Million fund for gaming developers which would be overseen by Forte.[27]

Awards and recognitions

For its creation and development of the ripple protocol (RTXP) and the Ripple payment/exchange network, the magazine MIT Technology Review recognized Ripple Labs as one of 2014s 50 Smartest Companies in its February 2014 issue. The criteria for the recognition revolved around "whether a company had made strides in the past year that will define its field."[28]

On February 9, 2014, Ripple Labs was named as a finalist for a 2014 PYMNTS Innovator Award in two separate categories: Best New Technology as well as Most Disruptive Company. The recognition pertains to Ripple Labs work in creating Ripple, an open-source, distributed payment protocol powering a new global value web.[29]

On January 12, 2016, Ripple was listed by UK-based company Richtopia at No. 8 in the list of 100 Most Influential Blockchain Organisations.[30][31]

Other Awards:

  • February 2015 - Fast Company. The World's Top 10 Most Innovative Companies Of 2015 In Money.[32]
  • February 2015 - American Banker. 20 Fintech Companies to Watch.[33]
  • August 2015 - Ripple Labs Awarded as Technology Pioneer by World Economic Forum.[34]
  • December 2015 - Forbes. Fintech 50.[35]
  • December 2015 - H2 Ventures, KPMG. Fintech 100.[36]
  • March 2016 - PYMNTS Innovation Project 2016. Best B2B Innovation Award.[37]
  • June 2016 - Fortune. 5 Hottest Companies in Fintech.[38]

Controversies and FUDs

On May 5, 2015, FinCEN fined Ripple Labs and XRP II US$700,000 for violation of the Bank Secrecy Act,[39] based on the Financial Crimes Enforcement Network's anti-money laundering (AML) additions to the act in 2013.[40] According to the FinCEN announcement: "Ripple Labs willfully violated several requirements of the Bank Secrecy Act (BSA) by acting as a money services business (MSB) and selling its virtual currency, known as XRP, without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering (AML) program designed to protect its products from use by money launderers or terrorist financiers."[41]

Ripple Labs agreed to remedial steps to ensure future compliance, which included an agreement to only transact XRP and "Ripple Trade" activity through registered money services businesses (MSB), among other agreements such as enhancing the Ripple Protocol.[39] It has been argued that the changes made to the protocol did not change the protocol itself, but instead added AML transaction monitoring to the network and improve transaction analysis.[40] However the FinCen statement clearly indicated that Ripple itself was making changes to the protocol as a result of the enforcement action. "Ripple Labs will also undertake certain enhancements to the Ripple Protocol to appropriately monitor all future transactions."[41]

Ripple executives, including CTO David Schwartz, have admitted the software that is sold to banks for payments processing, XCurrent, is not a blockchain or any form of distributed ledger. Schwartz described it as “bi-directional messaging” that can eventually plug into distributed ledgers, but xCurrent’s technology itself “is not a distributed ledger.”[42]

In May 2018, Stewart Hosie MP, at a UK parliamentary inquiry into digital currencies, questioned Ryan Zagone of Ripple about the value and nature of the XRP Cryptocurrency: "...but the point that was made earlier, Mr Zagone, is that if people buy XRP—a financial asset—from Ripple Labs, it does not entitle them to an ownership stake, there is no right to be converted back into conventional currencies and it does not pay any return. It also seemingly has no purpose. Is that simply to avoid XRP looking like a security or an equity, and to avoid the necessary regulation?" [43]

Ripple claims to be completely separate from and have no control over the XRP cryptocurrency, in spite of the FinCen press release describing XRP as "its virtual currency, known as XRP".[41] However Ripple controls the vast majority of the supply of XRP[44] and, according to its own published records, earns the majority of its income from selling XRP. They do own a lot of XRP but the network is not based on PoS, therefore the amount of XRP do not determine how much control you have over the network. The XRP Ledger has its own consensus algorithm with over 39 entities included in the overlap of all the currently published and used UNLs.[45]

In 2018 CEO claimed on multiple occasions that by end of that year "major banks" would be using Ripple tools that made use of the XRP cryptocurrency and that by end of 2019 "dozens" of banks would be using XRP.[46] Both claims by the end of 2019 were proven to be untrue. At a conference in June 2019,[47] Hikmet Ersek, CEO of Western Union, commented that his company had experimented with Ripple in 2018 but had chosen not to adopt their cryptocurrency based payments software because, “It’s five times more expensive”, than using their existing infrastructure.

In 2018 and 2019 Garlinghouse claimed on multiple occasions that the published error rate for SWIFT messaging was at least 6%,[48] this was shown to be untrue by research published by the London School of Economics Business Review that showed Garlinghouse's claims were based on mis-reading of a paper published by SWIFT that did not refer to error rates in messaging.[49]

In February 2020 an article in Financial Times Alphaville[50] revealed that Moneygram, the largest public user of Ripple's XRP based liquidity tools, has not only received a $50m investment prior to adopting the tools but that the software was provided free of charge by Ripple and that Moneygram was receiving an on-going subsidy for using XRP, amounting to $8.9m in Q4 2019. The same article revealed that Ripple was dependent on sales of XRP to remain profitable.

In October 2020, Ripple board member Ken Kurson[51] resigned from the company when he was charged with committing a range of cyber-crimes[52] by the United States Attorney for the southern district of New York.

References

  1. 1 2 3 "Company Overview of Ripple Labs Inc". BusinessWeek. Archived from the original on 27 January 2014. Retrieved 18 March 2014.
  2. 1 2 "Ripple Company Profile". Retrieved 16 September 2023.
  3. ↑ Reutzel, Bailey (7 December 2012). "Disruptor Chris Larsen Returns with a Bitcoin-Like Payments System". PaymentSource. Retrieved 18 March 2014.
  4. 1 2 Rip, Empson (11 April 2013). "Now Backed By Andreessen & More, OpenCoin Looks To Build A Better Bitcoin — And A Universal Payment Ecosystem". TechCrunch. Retrieved 17 March 2014.
  5. ↑ "FinCEN Fines Ripple Labs Inc. in First Civil Enforcement Action Against a Virtual Currency Exchanger" (PDF) (Press release). FinCEN. 5 May 2015. Archived from the original (PDF) on 12 May 2015. Retrieved 6 May 2015.
  6. ↑ Liu, Alec (6 October 2015). "A New Chapter for Ripple". Ripple. Retrieved 22 October 2015.
  7. ↑ "Ripple receives BitLicense". 13 June 2016. Retrieved 20 June 2016.
  8. ↑ "Ripple and R3 Reach Settlement". www.businesswire.com. 10 September 2018. Retrieved 1 April 2019.
  9. ↑ "Ripple Powered Mobile App to Provide On-Demand Domestic Payments in Japan". Ripple. 6 March 2018.
  10. ↑ "Live Transaction: Santander's One Pay FX". Ripple. 31 May 2018.
  11. ↑ "Ripple Improves Access to India with Kotak Mahindra Bank". Ripple. 27 June 2018.
  12. ↑ "SEC charges cryptocurrency firm Ripple and two execs with conducting $1.3 billion unregistered securities offering". CNBC. 22 December 2020.
  13. ↑ "Ripple Labs, Executives Sued by SEC for Failing to Register XRP". Bloomberg.com. 22 December 2020.
  14. ↑ "SEC.gov | SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering". www.sec.gov.
  15. ↑ "SEC's failed bid for Ripple execs' bank records shows government's crypto suspicions," Reuters, April 12, 2021.
  16. ↑ Howcroft, Elizabeth (17 May 2023). "Ripple buys crypto custody firm Metaco for $250 million". Reuters. Retrieved 22 June 2023.
  17. ↑ Browne, Ryan (17 May 2023). "Crypto firm Ripple buys Swiss startup as SEC crackdown forces companies to consider overseas moves". CNBC. Retrieved 22 June 2023.
  18. ↑ Browne, Ryan (22 June 2023). "Crypto firm Ripple gets in-principle payments license in Singapore". CNBC. Retrieved 22 June 2023.
  19. ↑ Huang, Claire (22 June 2023). "Blockchain payments firm Ripple gets in-principle approval from MAS for payment licence". The Straits Times. ISSN 0585-3923. Retrieved 22 June 2023.
  20. ↑ District court summary judgement, pdf, 13 July 2023.
  21. ↑ Michaels, Dave. "SEC Retreats From High-Stakes Lawsuit Over XRP Cryptocurrency". WSJ. Retrieved 23 October 2023.
  22. ↑ Truong, Alice (5 March 2014). "Move Over, Bitcoin. CrossCoin Bets On Ripple". Fast Company. Retrieved 18 March 2014.
  23. ↑ Kharif, Olga (7 October 2013). "Ripple Takes on Western Union With Deal to Grow Payments". Bloomberg.com. Bloomberg. Retrieved 28 January 2014.
  24. ↑ Ryan, Philip (29 April 2015). "Western Union Will Give Ripple a Chance". Bank Innovation. Retrieved 9 June 2015.
  25. ↑ Reutzel, Bailey (30 July 2013). "Innovators Create Self-Regulating Body for Virtual Currency". PaymentsSource. Retrieved 18 March 2014.
  26. ↑ "Ripple gives away $29 million of its cryptocurrency to public schools". CNBC. 28 March 2018. Retrieved 28 March 2018.
  27. ↑ "A Big Bet on Blockchain and Gaming: Ripple and Forte Announce $100 Million Fund". Fortune. Retrieved 28 March 2019.
  28. ↑ Bergstein, Brian. "50 Smartest Companies". MIT Technology Review. Archived from the original on 8 March 2014. Retrieved 12 March 2014.
  29. ↑ "Ripple Labs Named a Finalist for a PYMNTS 2014 Innovator Award for Ripple Payments Protocol" (Press release). 19 February 2014. Retrieved 3 July 2016.
  30. ↑ "Top 100 Blockchain Organisations: From CoinDesk to BitPay, These Are the Most Influential Organisations in the Distributed Ledger Space". Richtopia. Retrieved 21 January 2016.
  31. ↑ Dash (25 May 2016). "Richtopia's List of Top 100 Most Influential Blockchain Projects is out! Congrats to Dash for #47". Dash. Retrieved 27 May 2016.
  32. ↑ "The World's Top 10 Most Innovative Companies Of 2015 In Money". 9 February 2015. Retrieved 30 June 2016.
  33. ↑ "20 Fintech Companies to Watch". 13 October 2015. Retrieved 30 June 2016.
  34. ↑ "Ripple Labs Awarded as Technology Pioneer by World Economic Forum". Retrieved 30 June 2016.
  35. ↑ "Fintech 50:The Future Of your Money". Forbes. Retrieved 30 June 2016.
  36. ↑ "H2 Ventures KPMG Fintech 100". Archived from the original on 2 July 2016. Retrieved 30 June 2016.
  37. ↑ "Innovation Project 2016 Innovator Awards". Archived from the original on 5 April 2016. Retrieved 30 June 2016.
  38. ↑ "These are the 5 Hottest Companies in Fintech". Retrieved 7 July 2016.
  39. 1 2 "FinCEN Fines Ripple Labs Inc. in First Civil Enforcement" (PDF). Archived from the original (PDF) on 12 May 2015.
  40. 1 2 Todd, Sarah, and Ian McKendry (6 May 2015). "What Ripple's Fincen Fine Means for the Digital Currency Industry". American Banker. Retrieved 9 June 2015.{{cite news}}: CS1 maint: multiple names: authors list (link)
  41. 1 2 3 "FinCEN Fines Ripple Labs Inc. in First Civil Enforcement Action Against a Virtual Currency Exchanger | FinCEN.gov". www.fincen.gov. Retrieved 7 August 2020.
  42. ↑ Irrera, Anna (13 June 2018). "Banks unlikely to process payments with distributed ledgers for now, says Ripple". Reuters. Retrieved 28 July 2019.
  43. ↑ "Treasury Committee Questioning of Ripple". Retrieved 27 July 2019.
  44. ↑ "Ripple XRP Holdings". CNBC. 16 January 2018. Retrieved 9 June 2019.
  45. ↑ "Consensus Protocol | XRPL.org". xrpl.org. footnote 5.
  46. ↑ "Ripple CEO: Expect dozens of banks to use our cryptocurrency next year". CNBC. 4 June 2018. Retrieved 25 April 2020.
  47. ↑ "Western Union and Zelle Executives Dish on Competition and the Future of Mobile Payments". Retrieved 8 August 2020.
  48. ↑ "Swiss National Bank (SNB) - Research TV". www.snb.ch. Retrieved 25 April 2020.
  49. ↑ November 4th; 2019|Finance; FinTech; Information; Technology; Comments, LSE alumni|3 (4 November 2019). "Do six per cent of financial transactions sent via the Swift system really fail?". LSE Business Review. Retrieved 25 April 2020.{{cite web}}: CS1 maint: numeric names: authors list (link)
  50. ↑ Kaminska, Izabella (28 February 2020). "Register to read | Financial Times". Financial Times. Retrieved 25 April 2020.
  51. ↑ "Ripple Welcomes Ken Kurson to its Board of Directors". 23 February 2017.
  52. ↑ "N.J. Man, associate of Kushner, Giuliani, arrested by feds on cyberstalking charges". 23 October 2020.
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