Law firm Taylor-Copeland law has filed a class action suit against Ripple Labs for the sale of unregistered securities, according to the official complaint filed yesterday, May 3. The lawsuit targets Ripple, its subsidiary XRP II, and Ripple CEO Brad Garlinghouse, alleging that Ripple’s sale of XRP tokens is a violation of U.S. securities laws.
According to the complaint, the plaintiff, an individual named Ryan Coffey, purchased 650 XRP on Jan. 5 and sold it on Jan. 18 of this year for USDT, which he then exchanged for USD, sustaining a loss of around 32 percent, or $551.89.
One of the points in the body of the lawsuit is that the plaintiff did not expect to lose money on his investment due to the promotional practices of Ripple Labs, i.e. retweeting favorable article about XRP and attendendance by Garlinghouse at crypto conferences:
“XRP purchasers reasonably expected to derive profits from their ownership of XRP, and Defendants themselves have frequently highlighted this profit motive [...] Given its reliance on sales of XRP, it is unsurprising that Ripple Labs aggressively markets XRP to drive demand, increase XRP’s price, and thus its own profits.”
The class action suits alleges that the defendants have violated both the Securities Act and the California Corporations Code. The plaintiffs on whose behalf Coffey filed the claim – and which are written as being “so numerous that joinder of all members is impracticable” – are asking for payment for attorney’s fees, the costs of the suit, and punitive damages. In addition they request that the court declare the sale of XRP an unregistered securities sale and to prevent the defendants from further violating securities laws.
Tom Channick, a spokesperson for Ripple, told Cointelegraph in an email today that, according the company, Ripple is not a security under U.S. law:
“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.”
Although the amount of money lost as per the complaint, around $550, may seem relatively small, crypto Twitter persona WhalePanda noted on Twitter that the amount lost isn’t that important:
What people don't seem to realize is that's not about the amount but it's about setting a precedent. https://t.co/ZbIdC2A4O1— WhalePanda (@WhalePanda) May 4, 2018
Reddit users commenting on Ripple’s subreddit page mainly offer negative comments about the viability of the lawsuit, with user sixhours8 writing "I lost money because I fomo'd" is pretty much the complaint.”
David Silver, a partner at Silver Miller Law Firm, known for its multiple crypto-related class actions lawsuits, also commented on the case, telling Cointelegraph:
“Lawsuits like this are simply private litigants testing the legitimacy of these companies. As a crypto advocate who believes in accountability, I believe judicial clarity should be welcome in the industry.”
At the end of April, former Goldman Sachs partner and U.S. regulator Gary Gensler said that he believes both XRP and Ethereum (ETH) should be considered securities under U.S. law. According to Gensler: “[t]here is a strong case for both of them — but particularly Ripple — that they are noncompliant securities.”