Ripple lawsuit amended on basis of ‘XRP may not be a security’

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A longstanding lawsuit against Ripple has been refiled, with the plaintiffs amending their claim to include allegations of unfair and/or fraudulent business practices.

The class action lawsuit brought on behalf of a group of investors in Ripple had previously sought to establish that Ripple had breached U.S. securities laws through the sale and marketing of its XRP token.

The action alleged Ripple engaged in a scheme to raise funds in the hundreds of millions of dollars, through issuing an unregistered security, XRP.

The amended filing includes claims “under the alternative theory that XRP is not a security,” with claims for false advertising under California law added to the action late March.

An additional claim for unfair competition under California law has also been added, with the amendments widely considered a hedge against whether the court finds XRP to be a security or some other type of asset.

The claim also aims directly at the company, its hoarding of XRP, and the business practices of CEO Brad Garlinghouse, noting, “However, as discussed above, more than 60 percent of XRP is owned by Ripple and none of that XRP is used for anything at all, other than to be sold in the future to invest.”

Among the criticisms of Garlinghouse are his recent comments that he is “very, very, very long XRP” and “on the HODL side – holding XRP for long-term gains.”

The amended filing alleges these statements were “false when made as throughout 2017 Garlinghouse sold millions of XRP on various cryptocurrency exchanges. Review of the XRP ledger indicates that Garlinghouse sold at least 67 million XRP in 2017 and that he sold any XRP he received from Ripple within days of such receipt.”

The refiling option was open to the plaintiffs for a period of 28 days, after U.S. District Judge Phyllis Hamilton in the Northern District of California said in February that the suit could proceed to trial.

As a result of the refiling, the plaintiffs hope to account for every eventuality when the court comes to decide whether XRP is a type of security under U.S. law.