Another Lawsuit for Ripple: What Does This Mean for the Company and XRP Coin?

Data & Research / 09.04.2020

Ripple is a well-known company in the crypto space. The payment and exchange network aims to provide an instant and easy way to move money globally. Although Ripple’s idea was conceived in 2004, it wasn’t until 2011 that the company actually came to be, with investors jumping on board to support Ripple Labs. 

Ripple comes with its own currency, XRP, and presents several benefits for crypto enthusiasts. It’s a simple design for starters as a day-to-day payment system makes transactions cheap and quick. Besides, users can exchange Ripple for any currency or valuable with a minimal unified commission. 

The low commission currency exchange and fast international transactions have set Ripple apart in the crypto world. The network’s native coin, XRP, currently ranks 3rd on CoinMarketCap and has a $7.89 billion market cap. Ripple also boasts over 300 financial institutions in its network, spanning over 40 countries in six continents. 

However, even with all the excellent achievements and benefits, Ripple has been prone to several lawsuits. The company was just recently slammed with new allegations. In this article, we will delve into the history of lawsuits against the company. What do they mean for Ripple? 

History of Lawsuits Against Ripple

Ripple’s woes with the law began in 2015 when the American financial regulator, FinCen, fined the exchange of $700,000 for violating the Bank Secrecy Act. FinCen cited that the exchange willfully violated the act by acting as a Money Services Business and selling its virtual currency without first registering with the regulator. In so doing, Ripple failed to implement and maintain sufficient anti-money laundering (AML) program, as is required by FinCen. The penalty saw Ripple become the first virtual currency exchanger to face a civil money penalty from FinCen. 

Ripple was back in court in 2017 following a dispute with fellow distributed ledger startup R3. Both companies filed dueling lawsuits citing a contract dispute. The two companies had entered a contract in September 2016 that gave R3 the right to purchase five billion XRP at any time until September 2019. R3 claimed that Brad Garlinghouse, Ripple’s Chief Executive, tried to end the contract via an email in June 2017, contrary to their agreement.

It wasn’t until a year later that the two startups settled the dispute, with details of their agreement remaining confidential.  

Two-Year Class Action Lawsuit Against Ripple

Ripple’s most prolonged battle with the law began in 2018 after Ryan Coffer, an XRP investor, filed a lawsuit against Ripple in the San Francisco County Superior Court. Coffey claimed that he had lost money buying and selling XRP and was seeking damages on behalf of other investors who had suffered the same fate. The lawsuit named Brad Garlinghouse and another ten parties as defendants and claimed that Ripple had violated state and federal securities laws.

Ripple later moved the case to the US District Court level. Although Ryan tried to have the case moved back to the Superior Court of San Francisco, a judge denied the motion to remand the suit in August 2018. Following the denial of the motion, Coffer voluntarily dismissed the class-action lawsuit. 

A month later, Ripple Labs was slapped with a class-action lawsuit. Vladi Zakinov, an investor with XRP, filed the suit with the Superior Court of California, claiming that the XRP token was security controlled by Ripple. Vladi insisted that Ripple misguidedly claimed that XRP was a token and that he had suffered damage after buying XRP in January of that year. 

According to the lawsuit, CEO Brad Garlinghouse together with 25 other unnamed parties, did not register XRP when offering or selling it, as was required by law. Vladi also accused the defendants of making several improper statements that saw the price of XRP shoot up, reeling in significant returns for Ripple. 

Like the others before, another lawsuit sought damages following the price drop of XRP earlier in 2018. The complainant, an investor named David Oconer, stated that XRP did not offer investors some measure of control over the firm as traditional securities would. The allegations claimed that Ripple had complete control over the XRP ledger, thereby disputing the network’s decentralization nature. 

Consolidation of Lawsuits Against Ripple

In August 2018, Ripple attorney, Jake Chervinsky, sought to have the Vladi and Oconer lawsuits combined with another investor, Avner Greenwald, seeing as they involved the same issues. Ripple scored a small win on the matter after having the cases consolidated into one. 

Ripple’s attorneys filed to move the consolidated lawsuit to a federal court in November 2018. The attorneys argued that Greenwald was an Israeli resident and that the total amount of damages exceeded $5 million, all of which contributed to the right to have the case shifted under the US Class Action Fairness Act. Although the plaintiffs tried to have the case moved back to the Superior Court in San Mateo, a judge ruled Ripple in March 2019, which gave the company a slight advantage. 

In September 2019, Bradley Sostack, another investor, filed a lawsuit against Ripple, claiming that the company violated US securities laws by selling XRP. In response, Ripple filed a motion to dismiss the lawsuit, alleging that the investor should have brought the case within three years of the initial offering, and the repose had, therefore, expired. 

Although a ruling on the motion was expected on 15th January 2020, Judge Phylis Hamilton took the motion under submission. The judge later rejected the request in February, allowing investors to continue with the lawsuit against Ripple and XRP. However, she also reduced Ripple’s claims by dismissing allegations that the firm had made false statements. 

Amendments to the Lawsuit to Include Additional Charges

The consolidated class-action lawsuit made amendments to the filing on 25th March 2020, accusing Brad Garlinghouse of secretly selling 67,000,000 worth of XRP in 2017. According to previous case files, Brad had stated that he was holding XRP for long-term gains. However, the plaintiffs argued that Brad had been dumping XRP on retail investors to exchange cryptos and US dollars. The lawsuit claims that Brad and the other defendants had exclusive information on the XRP sales but failed to let investors in, which would have altered the overall performance of XRP in 2017. 

Just recently, two more accusations were made against Ripple, bringing the total number of claims to seven. The lawsuit now also claims that Ripple engaged in false advertising and violated the California Unfair Competition Law. Ripple still maintains that XRP is a token and that labeling it security would result in massive losses for investors, seeing as it is the third-largest cryptocurrency. Following the denial of the motion to dismiss the lawsuit, the case could proceed to trial, although it may take years.

What Next For Ripple?

Following the series of allegations against Ripple, it is no surprise that the altcoin has been on a downward trend in the last two years. XRP further declined to as low as ten cents following the crypto market crash due to the global COVID-19 pandemic. With XRP’s all-time high set at $3.58 about two years ago, the coin is now down by over 95%

However, things may be looking up for the altcoin, following the accurate monthly buy signal from the TD Sequential Indicator. The indicator is the creation of market specialist Thomas Denmark and has been used to predict future price movements in varying financial markets and asset classes accurately. 

According to the indicator, the XRP price charts have triggered a monthly buy signal. They indicate a reversal following the continual downward trend and price decline over the last two years. Although the asset has been one of the worst-performing ones during this period, XRP has maintained its position as the third-largest cryptocurrency, which could be a good sign for the altcoin’s future. Should investors follow this latest signal, they may be in for some significant rewards if XRP manages to regain bullish behavior soon.   

Author’s Note

It is quite clear that Ripple may soon face trial over the existing allegations, with experts claiming that these could increase. However, it is also clear that despite the XRP’s price decline over the last two years, the altcoin has done an excellent job of maintaining its position in the crypto world. Therefore, we can expect XRP and Ripple to continue having a significant impact in crypto markets despite the firm’s lawsuits. Crypto analysts even argue that XRP’s price could triple by the fourth quarter of this year if the classic bottom holds. 

avatar
Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.