Ripple Labs hit with securities class-action suit

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With the price of the currency slightly below par of late, Ripple appears to be facing more woes as it faces a class action lawsuit in a California court.

The XRP token has had a terrible year so far, losing no less than 80% of its value from a high of $3.30 to dip below the $0.50 mark at one point although it has recovered somewhat to trade at over $80 over the past few weeks. That is still very far away from its highs in January with investors having lost several thousand dollars if they decided to cash out when Ripple was falling.

In the United States, San Francisco resident Ryan Coffey recently filed a “securities class action” lawsuit  against Ripple Labs, its CEO Bradley Garlinghouse, and subsidiary XRP II LLC, along with 10 other individuals. In the suit, the plaintiff is alleging that the defendants have violated state and federal securities laws whilst engaging in illegal schemes to raise several hundreds of millions of dollars through the sale of unregistered XRP tokens.

The suit was filed by lawyer James Taylor-Copeland with the Superior Court of the State of California, seeking damages on behalf of Coffey and others who experienced similar situations. Court documents dated May 3 showed Coffey bought 650 XRP tokens at around $2.60 on January 6 per token and then sold them at $1.70 on January 18.

Coffee said that the lawsuit “arises out of a scheme by defendants to raise hundreds of millions of dollars through the unregistered sale of XRP to retail investors in violation of the registration provisions of state and federal securities laws.”

He said that unlike other cryptocurrencies such as Bitcoin and Ethereum, all 100 billion tokens of the XRP cryptocurrency were created by Ripple Labs on its inception in 2013. He further explains that 20 billion tokens were handed to the Ripple Labs founders and the rest amounting 80 billion to the company itself, with the defendants earning massive profits by selling them off quietly to the public in a never-ending initial coin offering (ICO). He claimed that these ICOs have become a magnet for unscrupulous practices as well as fraud.

The suit further states that defendants have marketed XRP to drive demand artificially whilst increasing its price. Other tactics used by the Ripple founders include blurring differences between Ripple Labs Enterprise Solutions and XRP, offering bribes to exchanges such as Coinbase and Gemini to list XRP whilst promising R3, an enterprise software firm with a network of banks and financial institutions with a 5 billion XRP option.