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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.
However, Ripple executives have long maintained that XRP is exempt from this classification, and the company further says that it has not yet been served with the lawsuit.
“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,” Tom Channick, Ripple’s Head of Communications, told CCN in a statement. “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.”
David Silver, a partner at Silver Miller Law Firm, known for its multiple crypto-related class actions lawsuits, also commented on the case:
“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.”
However, reports emanating from the SEC indicate that the Commission views the crypto as a security. Gary Gensler, ex-CFTC Chairman also recently identified the crypto as a “noncompliant security.” This characterization was due to the centralized distribution model employed by the company.
At present, XRP is valued at $0.90, which provides it with a circulating market cap of $35.4 billion and makes it the world’s third-largest cryptocurrency.