Ripple is having a very messy week. First, co-founder Jed McCaleb publicly decided to liquidate his XRP, which comprised 20% of the entire market cap. Unsurprisingly, the price fell by over 50% during the subsequent 48 hours. After McCaleb’s decision to sell his XRP holdings, Kraken CEO Jesse Powell announced his resignation from the Board of Ripple Labs in a candid post on the /r/Ripple subreddit. Following Powell’s public resignation, a lawyer for Ripple Labs sent a confidential cease and desist letter to Powell, threatening to publish its contents on Reddit if he did not retract his previous statements within three days. Unfazed, Powell posted the letter online. We have reprinted excerpts below.
[dropcap size=small]R[/dropcap]ipple lawyer George Frost begins his letter with strong words for Jesse Powell, arguing that while he was still a Ripple board member, Powell had colluded with Ripple co-founder Jed McCaleb to damage the company and score a large payday.
[Y]our recent public statements regarding Ripple and its CEO, Chris Larsen, are false and defamatory and are clearly intended to damage the company. We cannot let this pass without a firm response. Moreover, you appear not to understand your obligations as a Ripple board member to protect the Company’s fundraising plans and other confidential information; instead, you are using your insider knowledge to sabotage Ripple Labs and wrest large payments for yourself and McCaleb.
Frost then threatens Powell that he will make the letter public if Powell does not retract his statements. Obviously, this backfired since Powell posted the letter online himself.
This retraction demand is intended to satisfy the requirements of California Civil Code § 48a; for this reason after three days (if I do not hear back from you) I am copying Reddit as well, contingent upon your agreement to publish a retraction of the statements I identify below. I strongly urge you to retract your libels. The Company has been damaged significantly by yours and Jed’s misconduct. If you do not agree to retract within three days, we will publish this response. In addition to libel, we regard your falsehoods as prima facie evidence of a breach of fiduciary duty, and interference in prospective economic advantage.
The letter then details the specific parts of Powell’s resignation announcement in which Ripple claims he deliberately lied about what was going on behind the scenes at Ripple Labs.
Yet in your Reddit post, you gave no indication whatsoever of Chris’ [Author’s note: Ripple Co-Founder Chris Larsen] continuing offer to return most of his xrp to the Company, and instead you make a false statement of fact that he has refused to do so. You were informed and clearly knew otherwise; this is the definition of malice.
You also fail to disclose your own role in trying to leverage a top dollar buyout for McCaleb, your longtime friend and associate, and your communication of threats that otherwise the Company will face a fire sale of Jed’s xrp that would destroy the market price and disrupt a pending Ripple Labs financing round. This is not my conjecture; you made this threat at a board meeting. This is not only a breach of your duties as a director, but constitutes tortuous interference in the Company’s fundraising efforts, with potentially disastrous consequences.
You made these…statements knowing they were false, and did so maliciously with the intent to injure Ripple Labs in its business, and specifically to further damage prospects for a fundraising round (of which you are aware due to your role as a director). This is precisely the type of harm that has “a natural tendency to lessen profits,” and as such, is defamatory per se.
Finally, Frost informs Powell of the legal battle he will face if he refuses to retract his statements or makes any other libelous statements against Ripple Labs.
If Ripple Labs is forced to file suit to stop your wrongful conduct, it will also seek punitive damages, and an award of its attorney fees and litigation expenses. Please govern yourself accordingly.
This week has been a public relations nightmare for Ripple. XRP’s market cap experienced a freefall after McCaleb announced his sell-off, and though the market cap briefly crawled back to a little over $418 million, it has fallen back to $368 million as at the time this article was written.
In addition to worries about XRP’s market cap, the prominent payments processor will have to undergo some serious damage control to retain investor confidence as it sorts through the legal mess with Jesse Powell, who has upped the ante by posting a fiery retort to Ripple’s accusations. The coming weeks will reveal both which version of events Ripple’s investors believe and whether they are willing to ride out the storm.
This post was last modified on (Eastern Time): 26/05/2014 15:08