In a reversal of fortunes, Ripple’s XRP crashed drastically as investors reacted to a lawsuit from the Securities and Exchange Commission (SEC) alleging the token is illegal security.

The US securities regulator charged San Francisco-based Ripple Labs and its two executives for allegedly selling $1.3 billion worth of XRP in an unregistered public sale.

“We allege that Ripple, [Chris] Larsen, and [Brad] Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” Stephanie Avakian, the director of the SEC’s enforcement division, said in a statement.

Nevertheless, Ripple CEO Brad Garlinghouse rubbished the SEC lawsuit by calling it “fundamentally wrong as a matter of law and fact.” He vowed to challenge the regulator in court. Unfortunately, his assurance did little in helping XRP out of its running freefall.

Bearish Woes

The cost to purchase one XRP token sunk by as much as 37.94 percent in response to the SEC’s charge. It happened as the total XRP long liquidations in the last 24 hours surpassed the $36.5 million mark. Meanwhile, XRP’s potential to register extended losses increased further after OSL, a Hong Kong-based trading platform, delisted its Ripple-oriented services. Some community members agreed that it could prompt other exchanges to delist XRP as well.

Some thoughts on

-Problems with the SEC = You are f**cked
-November pump, supported by the airdrop, might be initiated by whales as last chance to dump at high prices
-First exchange delisting might cause a chain reaction
-I'm done with
-Chart looks awful

— Crypto$Hannibal 💙🇺🇦 (@CryptoHannibal1)

That raised the worries of a Long Squeeze — a situation in which investors who hold long positions feel the need to sell into a falling market to cut their losses.

XRP Technicals

XRP completely invalidated the Bull Flag indicator after its strong upside rally last week on a technical front. As shown in the chart below, the token broke below the consolidation pattern to flip crucial support at $0.33 into resistance.

The Ripple token eyes further downside correction as the SEC FUD grows. Source: 

Traders now eye an extended correction towards levels with historical value. The first in line is $0.26 that served as resistance during the September-November consolidation period. Breaking below the flipped level would have the XRP price test $0.20 as its downside target.