The U.S. Security Exchange Commission (SEC) is suing Ripple Labs and two of its top executives in New York over the alleged sale of $1.3 billion in unregistered securities. The lawsuit states that XRP is not a currency and should have been registered as an investment contract. On Wednesday, XRP dropped more than 25% its value after doubling in value this year, losing its place to Tether (USDT) as the world’s third-most valuable cryptocurrency. The market cap of XRP is $16 billion, down from $23 billion in November. Ripple CEO Bradley Garlinghouse and co-founder Christian Larsen are both named as individual conspirators in the lawsuit. The SEC said in July 2017 that Ripple raised money through an Initial Coin Offering (ICO) and broke multiple securities laws by failing to register with the agency. Jake Chervinsky, General Council for Compound Finance, said in a tweet, "This is quite bad for Ripple. Not exactly worst case, that'd be securities fraud, but close," he explained, "XRP is basically useless if deemed a security. Alleging violations through present day is a kill shot. Charging individual executives is remarkable. This is the SEC playing hardball." Ripple is questioning the lawsuit's timing as SEC Chairman Jay Clayton is stepping down by the end of the year and the U.S. government regulators had previously given XRP a status as a currency. Regardless, it's unlikely that changes in SEC leadership will have any impact on the Ripple case. Ripple co-founder Jed McCaleb reportedly sold over $120 million in XRP in December and over $350 million in futures contracts were liquidated on Tuesday and Wednesday ahead of Christmas Eve. Coinbase, Kraken, Binance.us, and other other big U.S. exchanges are caught between a rock and a hard place on delisting XRP in light of the lawsuit, according to CoinDesk. The SEC clearly wants to make an example of Ripple as a warning shot to similar crypto companies. Ripple Labs was founded in 2012.