Yet another securities fraud lawsuit has been filed against Ripple in California. In the latest suit, the lead plaintiff, David Oconer, is seeking to have the XRP cryptocurrency classified as a security.
The case was filed in California’s Superior Court sitting in San Mateo County and has named Ripple Labs, its chief executive officer, Brad Garlinghouse, and XRP II LLC, a money service business unit of Ripple Labs, as defendants.
According to the lawsuit, the way XRP cryptocurrency is managed and distributed by Ripple Labs as well as how the coin is conflated with the company’s product offerings makes XRP a security. Consequently, the suit claims that the firm has thus violated securities laws by selling it.
Ripple Labs is also alleged to have promoted the XRP cryptocurrency in a bid to increase its value. One of the ways employed by Ripple to achieve this was to limit distribution.
Per the suit, last year in May the company disclosed that the distribution of 61.68 billion XRP that Ripple owned would be limited, with the firm placing 55 billion XRP in an escrow account. According to the lawsuit, executives at Ripple, including the CEO, were active in promoting this fact with a view of driving the price up.
The lawsuit goes further to state that, by limiting supply, the intended effect was achieved.
“Ripple’s public commitment to limit the supply of XRP had its intended effect. In the weeks that followed, the price of XRP rapidly increased, from approximately $0.22 per token on December 7, 2017 to $3.38 per token on January 7, 2018,” the complaint reads.
This is the third class-action lawsuit that Ripple is facing, as CCN.com has previously reported. Last month a suit was filed by Vladi Zakinov, also in California’s Superior Court in San Mateo County, alleging that XRP is a security under the control of Ripple Labs.
According to Zakinov, Ripple should have registered XRP prior to selling it, though this never happened. Additionally, the lawsuit alleged that improper statements were made by the company and its executives and this had the effect of raising XRP’s price.
And in May there was another class action lawsuit against Ripple in which the same allegations of violating securities regulations were put forward. According to Ryan Coffey, the lead plaintiff in the particular suit, Ripple Labs and other defendants had profited massively by engaging in a “never-ending initial coin offering.” The lawsuit also accused Ripple Labs of portraying the XRP cryptocurrency as a good investment, as well as relaying optimistic price predictions.
The company’s defense team is comprised of Jo White, a former chair of the Securities and Exchange Commission, and Andrew Ceresney, a former enforcement chief at the same regulatory body.
Ripple has consistently refuted the argument that XRP is a security. In April the chief market strategist of Ripple, Cory Johnson, said in a television interview reported by CCN.com:
“We absolutely are not a security. We don’t meet the standards for what a security is based on the history of court law.”
Last month, a director of the Corporation Finance Division of the SEC, William Hinman, indicated that the body did not consider Ethereum to be a security. However, he made no mention of Ripple. At the time, a spokesperson for Ripple said they looked forward to getting a similar confirmation from the SEC.
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Last modified: May 20, 2020 6:55 PM UTC