Ripple sued by investors who claim XRP cryptocurrency is an unregistered security
Ripple Labs Inc. is being sued in a class-action lawsuit by investors who lost money investing in the company’s XRP cryptocurrency.
The plaintiffs in the lawsuit claim that they lost money after selling their XRP tokens because they were duped by Ripple’s promotion statements. The lawsuit specifically claims that Ripple offered XRP in breach of Section 12(a)(1) of the Securities Act in that the tokens were offered as an unregistered security.
That’s a serious allegation because, in the company’s own words, if XRP is found to be a security, “it would upend and threaten to destroy the established XRP market more broadly — a market involving over $500 billion in trading over the last two years.”
Coin and token offerings have an established history when it comes to securities law. The U.S. Securities and Exchange Commission took action against a growing list of companies for initial coin offerings that should have been registered under securities law. Notably, the SEC has never taken action against Ripple despite not being shy in targeting major firms such as Telegram Group Inc. and Kik Interactive Inc.
That could change now, however. Ripple Chief Executive Officer Brad Garlinghouse was quoted as saying late January that “we have been talking to the SEC for some period of time.” Heath Tarbert, chairman of the U.S. Commodity Futures Trading Commission, also isn’t sure if XRP is a security or not, saying Jan. 19 that “It’s unclear. Stay tuned, I’d say. Part of the issue is that our jurisdiction we share with the SEC. If it’s a security, it falls under their jurisdiction. If it’s a commodity, it falls under ours.”
Should XRP be deemed a security, the impact would be severe. XRP is the world’s third-largest cryptocurrency with a market capitalization of more than $10 billion.
XRP’s price dropped 5.8% over the last 24 hours, to 2.8562 cents as of 9:35 p.m. EST, its lowest level in a month. The drop may not have been influenced by the court ruling, since all major cryptocurrencies saw declines throughout the day. Bitcoin was down 5.8%, to $8,673.29, as of 9:35 p.m., also its lowest level in a month.
Photo: Marco Verch/Flickr
Since you’re here …
Show your support for our mission with our one-click subscription to our YouTube channel (below). The more subscribers we have, the more YouTube will suggest relevant enterprise and emerging technology content to you. Thanks!
Support our mission: >>>>>> SUBSCRIBE NOW >>>>>> to our YouTube channel.
… We’d also like to tell you about our mission and how you can help us fulfill it. SiliconANGLE Media Inc.’s business model is based on the intrinsic value of the content, not advertising. Unlike many online publications, we don’t have a paywall or run banner advertising, because we want to keep our journalism open, without influence or the need to chase traffic.The journalism, reporting and commentary on SiliconANGLE — along with live, unscripted video from our Silicon Valley studio and globe-trotting video teams at theCUBE — take a lot of hard work, time and money. Keeping the quality high requires the support of sponsors who are aligned with our vision of ad-free journalism content.