Blockchain groups in $1bn cryptocurrency battle

By September 8, 2017Bitcoin Business
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Two of the biggest blockchain companies are suing each other over cryptocurrency options worth more than $1bn in a battle between R3, a New York software developer owned by a group of banks, and Ripple Labs, its California-based rival.

The dispute underlines how growing interest in the potential of blockchain technology, a shared database system that underpins cryptocurrencies such as bitcoin, has raised the stakes in the race to become the leading player in the nascent industry.

The dispute burst into public view on Friday when R3 filed a complaint, alleging that Ripple’s chief executive had tried to terminate the options granted to R3 last year after they surged in value because of a rise in Ripple’s XRP cryptocurrency.

R3 said in the complaint that it had been granted an option to purchase 5bn XRP at an exercise price of 0.85 cents in September 2016.

At the time, XRP was worth less than the option price. But since then, as the price of many cryptocurrencies has shot up, XRP has surged above 21 cents, valuing the options at more than $1bn.

Ripple responded by filing a lawsuit a few hours later against R3, accusing it of “misleading Ripple to enter into multiple contracts, and then breaching those contracts after they were signed”. Its complaint said: “Almost immediately after the agreements were signed, R3 disappeared as a partner.”

The California-based company said that the options it granted to R3 were designed to “incentivise” it to work on a “technology partner agreement”. But it added that “R3 failed to take any steps to perform remaining obligations under the TPA, and instead focused all its attention on fundraising”.

It added that, after the exit from R3’s consortium of several large banks, including Goldman Sachs, JPMorgan Chase and Banco Santander, its “reduced status in the banking world greatly decreased the value proposition of Ripple’s partnering with R3”.

R3 said an emailed statement in response to Ripple’s lawsuit that it “does not discuss the details of ongoing litigation” and added: “We are confident in our position and hope for a speedy resolution of this matter.”

In its lawsuit, R3 said: “The option contract does not give Ripple the right to unilaterally terminate the option contract. Nevertheless, Ripple has unambiguously and unequivocally declared that it will not fulfil its obligations under the option contract.”

R3 said that it believed Ripple held 60bn of the 100bn of XRP that it has stated will be the maximum amount of the cryptocurrency it will issue.

Earlier this year, R3 raised $107m from more than 40 of the world’s biggest banks to fund the development of its Corda blockchain, or distributed ledger, system that it hopes will become the industry standard.

Ripple is suing R3 in a San Francisco court on five counts: fraudulent misrepresentation; fraudulent concealment; negligent misrepresentation; breach of contract; and breach of the implied covenant of good faith and fair dealing.

R3 is suing Ripple and XRP in Delaware for breach of contract and request for specific performance and it is suing Ripple on a separate count of tortuous interference with contract.

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