A class action lawsuit has been filed against Ripple Labs Inc., its CEO Brad Garlinghouse, and its subsidiary XRP II, LLC, in the Northern District of California. The lawsuit accuses the San Francisco-based fintech company of violating federal and California securities laws by offering and selling the digital asset XRP without registering it as a security.
According to the lawsuit, the plaintiffs are individuals and entities who bought XRP between July 3, 2017, and June 30, 2023, and suffered losses. The lawsuit claims that they have the right to recover:
(a) the consideration paid for the XRP, with interest, if they retained the XRP, less the current price of the XRP or upon tendering the XRP, or (b) damages if they sold the XRP at a loss.
The lawsuit alleges that Ripple engaged in the unauthorized sale of XRP, circumventing the registration requirements imposed by both federal and state securities laws. Also, the lawsuit seeks to represent two distinct classes: the Federal Securities Claims Class and the California State Securities Claims Class.
Ripple Denies XRP Is A Security
On the other hand, Ripple and the co-defendants argue that XRP is not a security and does not require registration. They say people use XRP mainly for global transactions and should not fall under the security category.
The lawsuit comes at a time when Ripple secured a partial win in the legal action taken by the United States Securities and Exchange Commission (SEC), where the judge stated that XRP was not a security when sold to retail investors. Also, the SEC’s December 2020 lawsuit against Ripple alleges an unregistered securities offering of $1.3 billion through the sale of XRP.
However, Ripple’s defense strategy revolves around the argument that XRP, primarily used for global transactions, should not be classified as a security. The deadline for class action members to exclude themselves from the lawsuit is April 5, allowing individuals and institutions to pursue independent proceedings against Ripple for compensation.
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