A third lawsuit was filed last week against Ripple Labs Inc., Brad Garlinghouse and XRPII LLC (which is a money services business unit of Ripple Labs). The lawsuit alleges that the defendants are liable to securities fraud. The plaintiff, David Oconer, is further seeking that XRP be declared a security.
The lawsuit claims that the digital asset known as XRP is managed and distributed by Ripple Labs hence making it part and parcel of the parent company. This means that the parent company of Ripple has violated US securities regulatory laws by issuing, maintaining and supporting XRP.
The plaintiff, through his lawyers, claims that Ripple manipulated the price of XRP by locking up 55 Billion XRP in escrow back in December. This in turn caused a supply guarantee that consequently led to the bull run that XRP experienced from December to January when it peaked at values close to $3.80.
The lawsuit points at a particular tweet by Brad Garlinghouse back in December that said the following:
Boom! 55B $XRP now in escrow. Good for supply predictability and trusted, healthy $XRP markets. Glad to finally let this #cryptokitty out of the bag.
This is the third such lawsuit against Ripple and XRP. Last month, another plaintiff, Vladi Zakinov, filed a similar suit alleging that XRP is a security and that he was damaged by the false marketing of the parent company. There is also another pending lawsuit against Ripple that was filed in January by Ryan Coffey. He claims that he purchased 650 XRP on January 6th only to sell them two weeks later at a loss of almost 30%. However, the case was brought on behalf of all XRP investors who purchased coins after January 1st 2018.
From the point of Ripple, XRP is not a security due to the following few factors:
- It was given to the company by its creator to be used on the Ripple Network
- XRP was created in 2004, the Ripple Company was established in 2012
- Both entities are entirely separate from each other
- There is no existing framework by the SEC governing digital assets
- FinCEN cleared Ripple to sell XRP back in 2015
It is with the above 5 points that perhaps the Ripple legal team, which includes a former SEC Chair, is working on a defense for the 3 cases.