For the third time in less than two months, a fresh lawsuit has been filed against the founders of Ripple Labs, the company behind the cryptocurrency Ripple (XRP). The plaintiff alleges that the defendants have made money by breaking state and federal securities laws and misleading the public through the sale of unregistered ripple tokens (XRP).
Plaintiffs are asking for a refund as well as damages, and allege organizers sold unregistered securities under California’s Corporate code.
The lawsuit, filed by a private XRP investor, is a class-action suit against Ripple Labs which also mentions Ripple CEO Brad Garlinghouse. Moreover, the lawsuit claims XRP is part of a never-ending initial coin offering.
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The plaintiff detailed in his filing all signs point to XRP being a security, which requires the company to disclose certain information to investors, including potential risks. Citing that 20 billion tokens were given to Ripple Labs’ founders and 80 billion to the company itself, he alleges that the defendants earned massive profits by quietly selling off this XRP to the general public.
Furthermore, the suit states that the defendants have employed several tactics to artificially drive demand and increase XRP price. One example, according to the private investor, was placing 55 billion XRP in a cryptographically-secured escrow account to allegedly create certainty of coin supply. At the time, the company said this lockup was made only to eliminate any concern that Ripple could flood the market, but in fact the action pushed the token price up by around 1000%.
Tom Channick, Ripple’s head of corporate communication, commented earlier on the ongoing litigation, saying that like any civil proceeding, they assess the merit or lack of merit to the allegations at the appropriate time.
“Whether or not XRP is a security is for the SEC to decide. We continue to believe XRP should not be classified as a security,” he added.