U.S. District Judge wasn't persuaded by the argument that the continuance of the case against Ripple, an American blockchain company focusing on payments technologies, would mean turning the broader USD 500 billion XRP market on its head, and the case continues.
As reported in January, Ripple claimed that the continuation of the case against the company and its CEO Brad Garlinghouse, raised by investors represented by the lead plaintiff Bradley Sostack, would not just threaten to eliminate XRP’s utility as a currency, but also to destroy the established XRP market that involves over USD 500 billion in trading over the last two years.
On February 26, U.S. District Judge Phyllis Hamilton, of the Northern District of California, decided that the case will proceed, though reducing the complaints against the company - some of it going in Ripple's favour, some of it not. The judge has dismissed some claims filed under California state law, but allowed for claims filed under federal law to be included.
just setting up my twttr— jack ???????????? (@jack)
Investors sued Ripple and its executives in 2018, claiming that the company persuaded them to purchase XRP, resulting in loss of money, that Ripple violated U.S. securities laws by selling XRP, and that XRP should be declared a security. Ripple has counter-argued that the complaint filing exceeds a three-year deadline, hence the case should be dismissed, while Sostack’s attorneys claim that this “is a twisted application” of the time limit that would undermine the law’s purpose of protecting investors from fraud.
The judge now seems to have somewhat agreed with Ripple's argument about the deadline, but found that the lawsuit can still proceed under the federal law, giving the time to amend.
“Based on plaintiff’s complaint and the judicially noticeable facts proffered, the court cannot conclude that defendants’ first bona fide public offer to sell XRP occurred before August 5, 2016 (three years prior to plaintiff’s filing of his federal securities claims in this action on August 5, 2019),” said Hamilton. "While defendants did acknowledge various 2013 offers and sales in their May 2015 settlement with the USAO (U.S. Attorney’s Office for the Northern District of California), the sales activity identified in that settlement does not show that defendants targeted the general public when offering to sell XRP."
Hamilton concludes that Ripple didn't make their first true attempt to sell to the public until 2017, when in May XRP was listed on a crypto exchange, to be supported by the "substantial volume of XRP sales" that happened after August 2016. She emphasizes that this opinion may be changed once the parties have developed a factual record.Watch the latest reports by Block TV.
As for the question of whether XRP is a security or now - it's still left open. Among other things, the judge concluded that any purchase of XRP by the plaintiff on an exchange qualifies as an issuer transaction, and that the plaintiff has adequately alleged that defendants offered the subject unregistered securities in California. The case is ongoing and may in the future provide the final word on whether or not this court believes XRP is a security, or if it was at the time relevant to the case.
Jake Chervinsky, General Counsel at Compound Finance, argues that "the major remaining issue is whether XRP was a security during the relevant time period," meaning this will have to be discussed in court - which is exactly what Ripple didn't want, given that "they tried to get the whole case thrown out on procedural grounds ("technicalities") & did not succeed."
No. There are no proposed rules or regulations in the pipeline that would directly impact this case.The SEC also has no authority here. Remember, the SEC doesn't make the law. Even if they came out tomorrow & said they think XRP is a security, the judge wouldn't have to agree.— Jake Chervinsky (@jchervinsky) February 27, 2020
Meanwhile, the third cryptoasset by market capitalization, XRP, is currently (10:25 UTC) trading at USD 0.23. It dropped 2.8% in the past 24 hours and 14% in a week.