The price of XRP (XRP-USD), the world’s third largest cryptocurrency by value, tumbled on Tuesday after the company that created it said US regulators were about to file a lawsuit against the business.

Brad Garlinghouse, chief executive of Ripple, said in a statement issued on Monday night that the US Securities and Exchange Commission (SEC) was preparing to sue his company over the sale of XRP.

The price of XRP dropped over 6% against the dollar in response to the news.

The looming case against Ripple is said to revolve around the company’s alleged control over XRP. Ripple was founded in 2012 as one of the US’s early cryptocurrency companies. The business minted a new cryptocurrency, XRP, which it began selling off. The company still owns the majority of XRP, holding the cryptocurrency in treasury and selling off fixed chunks at allotted times.

XRP is used for cross-border money transfer and has become popular with crypto investors who see it as potentially revolutionising the money exchange business. It has risen to become the third most valuable cryptocurrency in the world, behind bitcoin (BTC-USD) and Ethereum (ETH-USD). XRP today has a market cap of $20bn (£14.9bn) and Ripple itself was valued at $10bn in its last funding round in 2019.

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Ripple’s ownership of XRP has been controversial. The SEC’s case will reportedly allege that, because Ripple owns most of the supply, XRP counts not as a currency but an unlicensed security, akin to company shares. The SEC will allegedly claim Ripple has been selling these securities without authorisation from the regulator.

Garlinghouse said the SEC’s judgment was “fundamentally wrong as a matter of law and fact.” He pointed to judgments from the Justice Department and the Treasury’s FinCEN that XRP was a currency.

The regulator will reportedly name Garlinghouse and Ripple’s cofounder Chris Larsen as co-defendants in the case. On Twitter, Garlinghouse vowed to fight in the courts.

“Make no mistake, we are ready to fight and win — this battle is just beginning,” he said.

Ripple has long argued that it is simply holding XRP in trust while an ecosystem grows. The company argues that its fixed schedule of XRP sales means it does not “control” the asset and it therefore cannot be deemed akin to a stock.

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Garlinghouse said the SEC was “out of step” with other G20 nations and the US government on the issue. He said the regulator had “voted to attack crypto”.