The class action lawsuit against Ripple Labs goes into the next round
A class action lawsuit against Ripple Labs for releasing XRP as an unregistered security product is in the next round. The lawsuit, which has been pending since November 2018 and is led by the lead plaintiff, Bradley Sostack, is the oldest of all the Ripple Labs lawsuits. Ripple faces a total of seven charges during the trial. Ripple has filed a motion to dismiss three of the seven claims in a class-action lawsuit led by Bradley Sostack over the sale of XRP as an unregistered security. The allegations are that Ripple was involved in a fraud when it sold XRP.
According to a new court document, published
on June 8, Ripple Labs filed a motion to dismiss three of the seven charges
alleging Ripple’s fraud. In the motion, the company’s attorneys state that lead
plaintiff Bradley Sostack has failed to prove how Ripple employees and CEO Brad
Garlinghouse made fraudulent statements.
In detail, Ripple Labs is accused of
conducting an unregistered sale of securities in violation of the Securities
Act and in violation of sections 25110 and 25503 of the California Corporations
Code and of violating section 15 of the Securities Act as a controlling party.
Furthermore, Ripple is accused of violating section 25401 and sections 25110
and 25504 of the California Corporations Code. Finally, Ripple is also accused
of false advertising and unfair competition.
In the United States, the term “fraud” is
defined in such a way that the plaintiff has to prove two things. Firstly, the
fraud has to have actually been committed and secondly, the defendant has to
have been aware of the deception. According to Ripple, Sostack’s amended
complaint (FAC), filed in March, does not meet the requirements:
The Plaintiff’s FAC identifies the
allegations that purport to contain false statements,” reads the filing. But
these “alleged misrepresentations” cannot be shown to be considered fraudulent
and “Plaintiff does not (and cannot) explain how and why these statements are
In particular, Ripple’s attorneys also
address the allegation in the amended complaint that Ripple and Garlinghouse
were promoting XRP, while the XRP Ledger shows that Garlinghouse sold all XRP
he received from Ripple within days of receiving it. Ripple denies, however,
that this is a deception of investors. Just because Garlinghouse has sold his
XRP doesn’t mean that he hasn’t still been optimistic about the token’s
prospects, the motion says.
In general, the plaintiff has already
failed twice to prove the allegations of fraud, and a third time shall not be
admitted, which is why Ripple’s lawyers are demanding a dismissal of the
The Plaintiff alleges only that
“Defendants, separately or together, had knowledge of the falsity or misleading
nature of a statement or omission made in connection with the offers or sales
of XRP.” According to the defendants, that is improper and the plaintiff’s
claims should be dismissed with prejudice as a result. […]
The defendants state that the “Plaintiff
has twice failed to plead allegations sufficient to support the Fraud Claims. A
third attempt should not be permitted and these claims should be dismissed with
prejudice. That would forbid the plaintiff from re-accusing the company, or
Garlinghouse, on similar allegations
Interestingly, Ripple has also submitted
four documents in support of its case, one of which is the most recent letter
from the US Bureau of Consumer Financial Protection (CFPB). As CNF reported,
the US Bureau of Consumer Financial Protection has identified Ripple and XRP as
potential game changers that can fundamentally transform the remittance market.
Author : Jake Simmons