A class action lawsuit has been filed against Ripple Labs Inc, XRP II LLC, its wholly-owned subsidiary, Brad Garlinghouse, the CEO and others related to Ripple. The lawsuit accuses Ripple of among other things “scheming to raise hundreds of millions of dollars through the unregistered sale of XRP to retail investors in violation of the registration provisions of state and federal securities laws.”
The lawsuit was filed on May 3 by Taylor-Copeland Law, a San Diego law firm that further claims to be acting on behalf of aggrieved investors who have sustained losses as a result of Ripple’s sale of XRP tokens. Ripple created 100 billion XRP out of thin air and the company has since then gone on to quietly sell these XRP earning massive profits, the lawsuit further alleges.
In order to increase demand for XRP, and thereby increase the profits it can derive by selling XRP, Ripple Labs has consistently portrayed XRP as a good investment, relayed optimistic price predictions, and conflated Ripple Labs’ enterprise customers with usage of XRP. For example, in 2014, Ripple Labs publicly stated that “we will engage in distribution strategies that we expect will result in a stable or strengthening XRP exchange rate against other currencies.” Ripple Labs greatly increased these efforts to push XRP on the general public in 2017 and 2018.
The lawsuit also delves into allegations that Ripple attempted to bribe two of the most popular crypto exchanges in the US to list XRP. The two exchanges, Gemini and Coinbase are yet to list XRP but the lawsuit claims that the speculation led to the appreciation of XRP. The plaintiff is of the conviction that Ripple was the source of those rumors and that they were started deliberately to fuel an increase in the price of XRP.
The plaintiff further accused the company of having all the traditional hallmarks of a security and yet Ripple hadn’t registered it with the SEC.
XRP purchasers reasonably expected to derive profits from their ownership of XRP, and Defendants themselves have frequently highlighted this profit motive….. However, Defendants did not register XRP with the SEC, and many of the representations Defendants made regarding XRP were designed to drive demand of XRP, allowing Defendants to obtain greater returns on their XRP sales.
The lead plaintiff is Ryan Coffey who according to the lawsuit is a resident of San Diego, California who purchased 650 XRP on or about January 6, 2018, at a rate of $2.60 per XRP and sold that same XRP for approximately $1.70 per XRP on or about January 18, 2018. While Ripple Labs and Garlinghouse are the lead defendants, other defendants include agents, representatives, alter egos and employers who the lawsuit alleges acted with knowledge, permission and consent of the principal defendants.
It remains to be seen what will become of this lawsuit and whether or not it’ll have any impact on either the company or XRP.