The Securities Exchange Commission (S.E.C.) has filed charges against cryptocurrency firm Ripple for violation of federal regulations requiring offerings to be registered with the S.E.C. Alongside Ripple itself, co-founder Christian Larsen and CEO Bradley Garlinghouse have been charged with securities law violations.

According to the S.E.C.'s filings, from 2013 to the present, $1.3 Billion in XRP, Ripple's cryptocurrency, was traded without being properly registered. Ripple had apparently received legal advice prior to the charges, being warned that XRP could be classified under some circumstances as an "investment contract" under federal law, therefore requiring any offerings to be registered. Ripple ignored the advice to its own detriment, putting it at risk of S.E.C. scrutiny.

"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," the S.E.C. said.

Ripple has since tried to defend its actions by claiming that XRP is currency, with Garlinghouse calling the pending lawsuit against Ripple "fundamentally wrong as a matter of law and fact."

Garlinghouse's assertions don't look to be very sound, though, if one looks at XRP itself. As pointed out by Forbes, the around 100 billion XRP in circulation is controlled by a few individuals and has already been used to enrich traders. Some currencies like Bitcoin operate differently, having tighter controls on supply and functioning in practice more like a currency than a security, being that many merchants in the United States accept it as legal tender, and therefore, out of the reach of the S.E.C.