Ripple XRP has been hitting the headlines for the last few months for all the good reasons gaining tremendously in the market. However, these gains seem to be watered down after it emerges that the crypt-startup has been sues for an alleged securities fraud.
In the civil case, Ripple will be represented by the former Securities and Exchange Commissioner Chairperson, Mary Jo White and Andrew Ceresney. Filed in May by Ripple holder Ryan Coffey, the lawsuit is seen as shedding some light on the unregulated cryptocurrency market.
According to the lawsuit, the investor claims to have incurred lost $551.89 in loses while trading in XRP coins which violates federal and state securities laws. The complainant is being represented by James Taylor-Copeland, an attorney based in San Diego in a case that is filled in County Superior court in San Francisco.
Ripple Company and XRP Coin
According to the investor Coffey, the defendants include:
“Ripple, XRP II (the company’s registered and licensed MSB), Ripple CEO Brad Garlinghouse, and 10 unnamed parties”.
Concerns have been raises on the relationship between Ripple Labs, the CEO, Garlinghouse and the XRP coin. These concerns have been brought to light after the XRP market cap skyrocketed above $140billion in January before falling freely to under $34billions in May.
The Ripple director of regulatory relations, Ryan Zagone has come out clear to state that there is a clear cut difference between Ripple the company and XRP the coin.
“The development of the XRP Ledger, and the profits that investors expected to derive therefrom, were, and are, based entirely on the technical, managerial, and entrepreneurial efforts of Defendants and other third parties employed by Defendants.”
Ripple Glaring Failure
According to the investor, Ripple continues to be a centralized ledger and keeps profiting at the expense of its investors.it should be registered with SEC as a securities providing entity. The company inflated its price at the expense of the coin users and the court need to rescind in the excess of $300 million worth of XRP to gain trust among users according to the investor claims.
The Ripple team argues the case need to be handled by a federal court as opposed to the Superior court. In their argument they claim that:
“…the suit should be handled in federal court rather than in San Francisco Superior Court, where the complaint was initially filed. Although Ripple’s lawyers acknowledge that recent Supreme Court precedent in Cyan v. Beaver County Employees Retirement Fund does not permit removal of cases bringing only claims under the Securities Act of 1933, they claim that Cyan was decided in reference to the Securities Litigation Uniform Standards Act. 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…”
According to the Ripple XRP spokesperson argument, the decision on whether the coin is a security or not should be left to the SEC’s decision. “We continue to believe XRP should not be classified as a security,” she said in response to the complaint. “We feel confident that the claims regarding XRP are completely unfounded both in law and fact,” she said.
Taylor-Copeland, the plaintiff’s attorney exudes confidence that the case will hold despite the high profile team of lawyers Ripple has assembled. He argues that Ripple XRP can become self-destructive whether it stays as a security or otherwise. He concludes that it was improper for the case to be removed from the federal court and will fight for it to be hard at the state court.