There is new movement in a class-action lawsuit originally filed in May 2018, centered around allegations that Ripple violated the Securities Act through a 2013 initial coin offering (ICO) of the XRP token.
On March 25, an amended complaint accuses Ripple CEO Brad Garlinghouse of touting the token to prospective investors while silently liquidating his holdings.
Garlinghouse accused of liquidating 67 million XRP in 2017
The amended complaint also emphasizes that Garlinghouse represented himself as “very, very, very long” and “on the HODL side” with regard to XRP during 2017, suggesting that the Ripple CEO was holding his XRP for the long-term.
Despite his online posts, the plaintiffs allege that Garlinghouse sold 67 million XRP during 2017, adding that he was liquidating all of the tokens that he received from Ripple within days of receipt.
The suit also asserts that “all 100 billion of the XRP in existence were created out of thin air by Ripple at its inception in 2013, before any distribution and without functionality except as a speculative investment," adding:
“The value of XRP owned by Defendants substantially exceeds the value of Ripple’s revenue or cashflow from all other sources. Ripple’s dominant value proposition are the XRP tokens it owns and sells. Ripple’s value proposition as a company depends upon the promotion of XRP, yet XRP is entirely or essentially pre-functional and purchased by investors in anticipation of profit based on the efforts of Ripple.”
Ripple accused of misrepresenting XRP’s utility to dodge securities laws
The plaintiffs also added emphasis to claims that Ripple and Garlinghouse misrepresented XRP as having the utility of comprising a “bridge currency” so that the token could evade being classified as a security.
“Defendants’ claims that XRP has a utilitarian purpose are false,” the plaintiffs state, adding:
“These claims are misrepresentations and omissions of material facts to investors because the utility of XRP (or lack thereof) is pertinent to the value of XRP. Simply stated, these false claims about XRP's utility are nothing but an attempt to avoid the application of securities laws and drive demand for XRP.”
Judge requested amended suit
While Ripple sought the dismissal of the suit in September, U.S. District Judge Phyllis Hamilton allowed it to move forward in February.
However, the judge requested that the plaintiffs explain the basis for their claims that Ripple made fraudulent claims concerning greater detail, citing several examples of the plaintiffs’ claims that were too general in scope. The aforementioned March 25 filing apparently represents a revision of the plaintiffs’ claims.