A discontented Ripple (XRP) invest filed a class-action lawsuit against Ripple Labs. The investor explained that Ripple was violating regulations in the United States due to the fact that Ripple Labs sold a token to the general public.
Ripple Accused of Breaking US Regulations
In a moment in which regulators are discussing about virtual currencies and ICOs whether to consider them securities or commodities, Ripple has been denounced by an unhappy investor. The lawsuit presented by the investor includes Ripple’s CEO Brad Garlinghouse and Ripple Labs.
The lawsuit explains that Ripple and Garlinghouse conducted a ‘never-ending ICO’ that should be classified as an unregulated security according to the definitions present in the US Securities Act and the California Corporations Code.
The suit reads as follows:
Defendants have since earned massive profits by quietly selling off this XRP to the general public, in what is essentially a never-ending initial coin offering (“ICO”). In order to 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 Lab’s enterprise customers with usage of XRP.”
Ryan Coffey, the investor that started the case, purchased 650 XRP coins on January the 6th, 2018. At that moment the token was being traded around $2.6 dollars. But then, he decided to sell all his funds for $1,105. At that moment, he sold the XRP for USDT (Tether, the so controversial virtual currency pegged to the dollar). In this way, he lost $551 dollars because of the price fluctuations between USD and USDT.
The firm involved in the case is a California-based law firm that specializes in blockchain and crypto cases. In the past the company worked for other investors that decided to fill lawsuits.
Is Ripple a Security?
Ripple is very concerned about this issue and its executives argue that XRP is exempt from this classification.
In a statement provided to CCN, Tom Channick, Ripple’s Head of Communications commented:
“We’ve seen the lawyer’s tweet about a recently filed lawsuit but have not been served. Like any civil proceeding, we’ll 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.”
At the moment, Ripple is one of the most important virtual currencies in the market. It is the third cryptocurrency by market capitalization with $34.75 billion dollars’ market value. Moreover, each Ripple coin is worth $0.88 dollars. Back in January, Ripple reached $3.64 dollars per coin. Since then the market couldn’t recover and was traded under $0.5 dollars per coin.
Currently, there is an important discussion whether Ripple, Ethereum, and other ICOs are considered securities or not. The next months will be of importance to see what the most important regulators in the United States (SEC and CFTC) will comment about virtual currencies, and tokens.