Tetragon Financial Group Ltd., a publicly-traded closed-ended investment company, filed a complaint under seal against Ripple in the wake of the U.S. Securities and Exchange Commission (SEC) taking legal action against the company for improperly raising more than $1.3 billion in an ongoing sale of XRP tokens.

The SEC alleges that the token sale is akin to a securities sale and the blockchain firm should have registered with the agency.

Ripple maintains its innocence and argues that the XRP token is a currency and not a security as alleged by the SEC.

Tetragon, the lead investor in Ripple’s Series C funding round where the blockchain firm raised $200 million to value the company at $10 billion, is seeking to “enforce its contractual right to require Ripple to redeem” Series C preferred stock that the global investment firm holds, Bloomberg reported.

The investment firm also wants to prevent Ripple from spending any or all of its cash reserves as well as other liquid assets until the payment is settled. Tetragon requested a preliminary injunction, temporary restraining order, and an expedited trial.

Ripple published a short statement in response to Tetragon’s action.

“In Ripple’s Series C investment agreement, there is a provision that if XRP is deemed to be a security on a go forward basis, then Tetragon has the option of having Ripple redeem their Ripple equity. Since there has been no such determination, this lawsuit has no merit. We are disappointed that Tetragon is seeking to unfairly take advantage of the lack of regulatory clarity here in the U.S. The courts will provide this clarity and we are very confident in our position,” responded Ripple.

Ripple effects of the SEC’s lawsuit

The action taken by the securities regulator against Ripple has hit XRP - the cryptocurrency affiliated with Ripple - hard.

The token price is down more than 60% since Dec. 22 last year when the SEC filed its complaint against Ripple. 

A number of exchanges have broken ties with Ripple’s token, with U.S. and foreign trading platforms removing XRP markets.

Major exchanges such as Binance.US, Bittrex, and Coinbase have delisted the cryptocurrency. 

Coinbase, arguably the biggest crypto exchange in the U.S., is facing a lawsuit aiming to recover the commission the exchange made over the sale of XRP tokens to the public. 

The proposed class-action lawsuit alleges that Coinbase knew that XRP tokens were securities but still gained an unfair advantage over other exchanges by selling the cryptocurrency on its platform.

The lawsuit comes after Coinbase filed for an initial public offering, marking a major step for a nascent industry aiming for mainstream recognition.