Ripple Hires Former SEC Chair In Lawsuit
Ripple Labs has brought on a high-profile team from Debevoise & Plimpton, former Securities and Exchange Commission (SEC) chair Mary Jo White and her enforcement chief Andrew Ceresney, to defend against a securities fraud lawsuit.
Ceresney served as the SEC's director of enforcement between April 2013 and December 2016, with White serving as SEC chair between that period up until the end of the Obama administration in January of last year.
Ryan Coffey – an investor, filed the lawsuit as he believes that his $551.89 in XRP were lost due to the digital coin not being registered as a security with the SEC. He alleges that Ripple profited from increases in the cryptocurrency’s price at the expense of investors as Ripple maintains a “centralized XRP” ledger.
The proposed class-action lawsuit alleges that Ripple violated state and federal securities laws. It rotates around the debate of whether XRP is a security, given its relationship with Ripple, as the firm highlights that the token is well defined. The lawsuit, filed by solo San Diego securities lawyer James Taylor-Copeland, seeks to rescind more than $300 million in XRP purchases and establish a constructive trust over the proceeds of Ripple’s alleged sales of the cryptocurrency.
The case has been transferred to the US District Court for the Northern District of California from the San Francisco County Superior Court.
Tokens Classified as Security?
Ripple’s lawyers argue that the federal court has jurisdiction under the Class Action Fairness Act, noting that Cyan didn’t address whether CAFA expressly permits removal of those claims. They also point out that the plaintiff has brought state law claims, which they claim are themselves removable, in addition to the Securities Act claim.
“We continue to believe XRP should not be classified as a security,” said a spokesperson for Ripple, adding, “We feel confident that the claims regarding XRP are completely unfounded both in law and fact.”
Taylor-Copeland, the plaintiff’s lawyer said that moving the case to federal court was “entirely improper” and that he intends to return it to the state judiciary system. He commented on the case:“Whether or not their XRP token is a security is an existential threat to their entire business model.”
Ripple’s head of corporate communication, Tom Channick said,
“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.”