Using SEC Guidance and Ripple Execs’ Tweets to Incriminate Company for Selling “Unregistered Security” XRP
- “XRP is a Security Under California Law,” argues the complaint against Ripple
- Plaintiff looking to be awarded damages for suffering loss of $118,100 and more
- Ripple has 45 days from August 5th to file for response or dismiss a motion, but likely to drag for a long time
The complaint against Ripple and its CEO Brad Garlinghouse by Plaintiff Bradley Sostack, individually and on behalf of others who purchased Ripple XRP tokens put forward the Securities and Exchange Commission’s ruling as an argument.
Apart from the common arguments, 100 billion XRP in existence created out of thin air by Ripple and being centralized seen in other similar cases, revised complaint filed on August 5 also argues, “XRP Is a Security Under California Law.”
Using SEC’s guidance for support
It mentions that the SEC has already made it clear that digital tokens, such as XRP, often constitute:
“securities and may not be lawfully sold without registration with the SEC or pursuant to an exemption from registration.”
Moreover, it points out how one of the top financial regulators in President Obama’s administration likewise stated that there is a “strong case” to conclude that “particularly Ripple” has violated securities laws by issuing and trading “noncompliant securities.”
The plaintiff further went on to say the guidance provided by the SEC's FinHub for assessing whether a crypto-token offering is security when applied to XRP tokens, confirms:
“XRP tokens also qualify as a security under California law.”
Tweets as Evidence
Interestingly, the complaint also features numerous tweets as evidence to “Success of XRP Requires Efforts of Ripple.” One such tweet mentioned is by Garlinghouse from September 11, 2017, who said in an interview with CNBC,
“People are looking at the success Ripple has been having as a company, and I think that’s increased the value of XRP.”
On November 29, 2017, Ripple’s Senior Vice President of Business Development also tweeted, “Get Ripple on Coinbase.”
Looking to be awarded damages ($118,100)
According to the filing, Plaintiff Sostack and other members are looking to be awarded damages, for all damages sustained, other equitable relief as the Court may deem just, and reasonable costs and expenses incurred in this action.
Sostack purchased 128,978.88 XRP between January 1, 2018 and January 16, 2018, for approximately $307,700 and suffered a loss of approximately $118,100.
Ripple pursuing a strategy of delay
Rippe now has 45 days to answer the company. It could either file a response or a motion to dismiss. According to Jake Chervinsky, General Counsel at Compound Finance, there are chances of 30% of Ripple answering and 70% of motion to dismiss.
Even if they do respond, they will probably ask for an extension on the responsive pleading deadline too, so they “won't end up filing until October or later.” As for how long it could go on, Chervinsky says it depends on both sides and how long they want it to be prolonged.
“So far, Ripple has appeared to pursue a strategy of delay, which makes sense given its deep pockets & the pro-defense economics of the case. Ripple could probably delay for years if necessary to work out a good settlement,” Chervinsky added.