Amended Lawsuit Against Ripple Now Offers Theory That XRP May Not Be a Security
While the lawsuit against Ripple Labs still alleges the firm broke securities laws, the plaintiffs now seem to be hedging their bets.
An amended complaint against Ripple has been filed by XRP investors in a long-running lawsuit involving allegations of breaches to U.S. securities law.
The two-year class action – which claims Ripple, a blockchain payments infrastructure firm, violated securities rules with its sales and marketing of the XRP cryptocurrency – has been refiled with additional claims to back up the case that Ripple and its CEO, Brad Garlinghouse, had undertaken unfair or fraudulent business practices.
The suit, with former XRP investor Bradley Sostack as lead plaintiff, was brought on behalf of all investors who purchased XRP (XRP) tokens issued and sold by Ripple. It alleges a scheme to raise hundreds of millions of dollars through sales of an unregistered security, XRP, to retail investors.
According to a court document filed on March 25 (see below), a sixth claim for relief asserts false advertising in violation of California business law. Notably, this amendment appears to see the plaintiffs hedging their original case, stating this claim is made "under the alternative theory that XRP is not a security."
An additional seventh claim further accuses the firm of unfair competition in violation of California law, also under the theory that XRP is not a security.
The amendments seem aimed to inject the "alternative theory" into the suit in case the judge rules Ripple did not issue and sell an unregistered security.
The other notable changes to the suit take aim at Ripple and Garlinghouse, citing their statements about XRP being a utility token essential for international payments and that sales are primarily to market makers.
"However, as discussed above, more than 60 percent of XRP is owned by Ripple and none of that XRP is used for anything at all, other than to be sold in the future to invest," the plaintiffs claim.
It also hits out at Garlinghouse's claims that he was “very, very, very long XRP” and was "'on the HODL side' – holding XRP for long-term gains. "
That, the filing states, "was false when made as throughout 2017 Garlinghouse sold millions of XRP on various cryptocurrency exchanges. Review of the XRP ledger indicates that Garlinghouse sold at least 67 million XRP in 2017 and that he sold any XRP he received from Ripple within days of such receipt."
Plaintiffs had the option to refile amended claims under California law within 28 days of the previous ruling. U.S. District Judge Phyllis Hamilton in the Northern District of California ordered in February the suit could proceed to trial. The action could include claims filed under federal law but Judge Hamilton dismissed some claims filed under California state law, prompting the refiling.
The order followed a hearing held in mid-January between the plaintiff, Bradley Sostack and the defendant, Ripple, its XRP II subsidiary and CEO, Garlinghouse.
Read the full filing:
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 2023, 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.