The third securities fraud lawsuit has been filed against Ripple in California by the lead plaintiff David Oconer who is a private XRP investor. Ripple Labs, Brad Garlinghouse, its chief executive officer, and XRP II LLC, a money service business unit of Ripple Labs are named as defendants.
Ripple Labs Inc. and the company’s CEO are accused of having conflated their token with its proprietary Ripple technology and of getting illegal benefits from price growth all the time. According to the lawsuit, due to the way how XRP cryptocurrency is managed and distributed by Ripple Labs, it should be classified as a security. That’s why, the suit claims that the company has violated securities laws by trading their crypticurrency.
XRP is not classified as a security. Moreover, the company firmly insists on their position. “We absolutely are not a security. We don’t meet the standards for what a security is based on the history of court law”, said Ripple’s chief market strategist Cory Johnson. Nevertheless, there are still a lot of debates about the status of XRP.
Garlinghouse, in his turn, even enumerated three reasons why XRP can’t be considered to be a security, highlighting that “Ripple is different than XRP”:
Moreover, the nature of the XRP’s centralized and mining-free distribution model that actively attracts public’s attention, has allowed the company to hold a continuous ICO period. Thanks to this model, Ripple Labs Inc. has managed to sell close to $100 million worth of their own cryptocurrency only in the last quarter of 2017. The funds that the company gets selling XRP is by far Ripple’s biggest source of revenue.
In this context, the lawsuit claims that Ripple is artificially increasing the value of its token by distributing the information that some 55 billion units of XRP are being held in an escrow account. According to Garlinghouse, usage of escrow accounts is very good for supply predictability, which is another way of making investors believe that there is a huge amount of tokens held by the parent company.
With a view to ensure a proper legal defense, Ripple has employed two former US Securities and Exchange Commission managers, Andrew Ceresney and Mary Jo White. The case with XRP can become a unique precedent for cryptocurrency industry regulation in the US and for the entire crypto community.
Let us also mention that at press time, according to CoinMarketCap, XRP is traded at $0.49 and is ranked the third largest cryptocurrency in the world with its market cap of $19,3 bln.
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