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Ripple Labs resolves criminal investigation
San Francisco, CA, May 5 – Ripple Labs has agreed to resolve a criminal investigation in exchange for a settlement agreement calling for a series of substantial remedial measures, including a migration of a portion of Ripple’s virtual currency business to a separate entity, the company’s ongoing cooperation in other investigations, an extensive remedial framework to ensure future compliance with federal laws and forfeiture and penalties totaling $700,000, announced U.S. Attorney Melinda Haag of the Northern District of California.
The agreement will resolve allegations that Ripple and its subsidiary failed to follow the law while engaging in the exchange of virtual currency and that the entities failed to establish and maintain an appropriate anti-money laundering program.
Aside from monetary penalties in the form of forfeiture, the remedial framework requires the migration of any component of Ripple’s business that is engaged in the exchange of virtual currency into an entity registered with FinCEN.
“By these agreements, we demonstrate again that we will remain vigilant to ensure the security of and prevent the misuse of the financial markets,” said U.S. Attorney Haag. “Ripple Labs Inc. and its wholly-owned subsidiary both have acknowledged that digital currency providers have an obligation not only to refrain from illegal activity, but also to ensure they are not profiting by creating products that allow would-be criminals to avoid detection. We hope that this sets an industry standard in the important new space of digital currency.”
The agreement is the culmination of a criminal investigation conducted by U.S. Attorney’s Office and the Internal Revenue Service’s Criminal Investigation Division. FinCEN joined the investigation with a parallel civil enforcement action. In that action, Ripple Labs and XRP II have agreed to pay a $700,000 civil penalty, $450,000 of which will be designated a forfeiture to settle issues raised in the U.S. Attorney’s investigation.
Ripple described itself as an exchanger of virtual currency in a December 2013 filing made in San Francisco, California, federal court in an unrelated case. As an exchanger, Ripple was required to register with FinCEN and to comply with applicable federal laws and regulations. Yet Ripple sold XRP even though it had not registered with FinCEN, effectuating sales of over approximately $1.3 million in April 2013 alone.