A new turn came in Ripple’s security vs. token debate on Tuesday as company was sued by another disgruntled investor on the grounds that it’s an unregistered security. This is second such lawsuit filed against the company as first one was filed last month by another disgruntled investor Ryan Coffey. The lawsuit names Ripple Labs, XRP II, CEO Brad Garlinghouse and 25 others as defendants, and it has been filed in Superior Court of California in San Mateo county.
The investor who has filed the suit is known as Vladi Zakinov. He suffered losses from XRP in January this year. His lawsuit says:
“XRP, despite its name as a ‘token,’ is actually a security under California law. In particular: (i) Ripple uses the funds it raised from the sale of XRP to fund its business ventures; (ii) the Company indiscriminately offers XRP for sale to the public at large; (iii) plaintiff and the Class (as defined herein) are effectively powerless to control the success of Ripple and XRP; and (iv) plaintiff and the Class members’ investment is substantially at risk and is without nay security.”
The filing also has some other allegations that are more serious in nature. They’re:
- The defendants were required to register XRP when offering or selling it, but they didn’t.
- They made a series of improper statements which drove up the price of XRP, post which Ripple benefited from the sell-off at high prices.
Moving further, the suit claims that in future other XRP investors may also lose all of their money as they can’t control Ripple.
A Ripple spokesperson, when contacted by Coindesk, was very sharp in his rebuke of lawsuit. He said:
“This is just another example of an extortionist bringing forth an opportunistic suit that lacks merit. We feel confident that the claims regarding XRP are completely unfounded both in law and fact.”
Zakinov’s Counsel for the case did not immediately respond to media queries (perhaps because the matter is sub-judice).
So now it’s a double-front battle for Ripple to claim that it’s not a security. Previously prominent regulators (i.e. CFTC Chairman, SEC Chairman) have also pointed out that XRP seems to be a security owned by Ripple than a currency made for mass consumption. Though Ripple has been stepping up its efforts in the recent days to distance itself from XRP, it remains to be seen how effective those efforts will be and how authorities will react to them.