Investor Sues Ripple Alleging 'XRP Is a Security'
An investor is suing Ripple Labs, claiming that XRP is a security pertaining to the startup.
:format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/SJO3MLYSINHOVBIMFMSGY6APN4.jpg)
(Shutterstock)
An investor who claims they lost money buying and selling the cryptocurrency XRP has filed a class action lawsuit against distributed ledger startup Ripple, alleging that the company violated state and federal securities laws.
Ryan Coffey, represented by San Diego attorney James Taylor-Copeland, filed the suit in the San Francisco County Superior Court on Thursday. Coffey is seeking damages "on behalf of all investors who purchased Ripple tokens ("XRP") issued and sold by Defendants," naming Ripple, XRP II (the company's registered and licensed MSB), CEO Brad Garlinghouse, and 10 unnamed parties.
Ripple Labs and Garlinghouse have come under increased scrutiny in recent weeks over the degree of association they have with XRP, a cryptocurrency that surged to a market capitalization of over $140 billion in January, but has since fallen below $35 billion. Ryan Zagone, Ripple's director of regulatory relations, told a UK parliamentary committee Tuesday that "there's not a direct connection between Ripple the company and XRP."
For some observers, though, the relationship between the company and the cryptocurrency is clear. Thursday's complaint argues:
U.S. federal law requires companies selling securities to register with the Securities and Exchange Commission (SEC). Whether a financial instrument qualifies as a security depends on the Howey test, a standard derived from a 1946 Supreme Court case.
If an instrument involves an investment of money and carries a reasonable expectation of profits – an expectation that depends on the actions of a specifically identifiable group of people – then it is a security. Coffey's complaint argues that XRP checks off all of those boxes.
Indeed, the lawsuit is one that could remain a case to watch given that the question of whether XRP is indeed a security is still hotly debated, as profiled by CoinDesk.
When reached for comment, Tom Channick, Ripple's head of corporate communications, told CoinDesk via email:
Taylor-Copeland was not available to comment on the complaint before press time.
Read the full complaint below:
Coffey v. Ripple Labs Complaint by CoinDesk on Scribd
DISCLOSURE
Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.