Grayscale liquidating XRP Trust
Grayscale's new CEO, Michael Sonnenshein, is liquidating its XRP Trust (Photo: Grayscale)
Ripple,  XRP

Citing SEC lawsuit, Grayscale liquidating XRP Trust

Grayscale Investments said the move was a result of the SEC’s securities lawsuit against Ripple, but cited concerns it would have difficulty selling XRP rather than legal concerns

By  / January 13, 2021 /

Grayscale Investments is liquidating its XRP holdings and will return the proceeds to investors in its Grayscale XRP Trust.

In a Jan. 13 announcement, the company said that it acted as a result of the Securities and Exchange Commission’s lawsuit Dec. 22 lawsuit against Ripple, which owns 45 billion XRP—out of 100 billion total—and uses the cryptocurrency for international financial transfers in its RippleNet On-Demand Liquidity product.

The SEC claims that XRP is an unregistered security and that Ripple and its top executives have illegally sold $1.38 billion worth of it. 

“In response to the SEC’s action, certain significant market participants have announced measures, including the delisting of XRP from major digital asset trading platforms,” Grayscale said. 

As a result, the firm came to the “conclusion that it is likely to be increasingly difficult for U.S. investors, including the Trust, to convert XRP into U.S. dollars, and therefore continue the Trust’s operations.”

The company’s move was not unexpected, as its $300 million Grayscale Digital Large Cap Fund dropped XRP on Jan. 5.

As of Jan. 12, the Grayscale XRP Trust listed $11.3 million in assets under management. That vast majority of Grayscale Investments’ $25 billion is in its $21 billion Grayscale Bitcoin Trust and $3 billion Grayscale Ethereum Trust. 

The price of XRP was between $0.28 and $0.30 on Jan.13, according to CoinMarketCap. XRP dropped steeply in the wake of the SEC filing, falling more than 50% to $0.175 before rebounding to its press-time price of $0.30.

In the wake of the lawsuit—which Ripple has pledged to fight vigorously—most major American exchanges suspended trading in XRP out of concern that they or their customers could be caught up in an SEC enforcement action.

Kraken is the only major U.S. cryptocurrency exchange that has not announced a halt to XRP trading, and it has remained silent on the matter. 

J.P. Thieriot, CEO of trading platform Uphold, is among the only exchange executives to announce his intention to keep XRP listed, saying that the SEC’s lawsuit is costing “completely innocent folks” billions of dollars. 

Disclosure: The author’s 401k includes an investment in the Grayscale Bitcoin Trust.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.