By
Temitope Olatunji
April 19th, 2024
Ripple faces another legal hurdle to jump with claims that its monthly XRP sales constitute illegal sales of securities.
Ripple Labs Inc, and its CEO Brad Garlinghouse are enmeshed in a lawsuit with Bradley Sostack who is the court-appointed plaintiff in a lawsuit that argues that Ripples monthly Escrow sales of its token constitute illegal sales of securities.
The filing which was made public on Monday indicates that the new claim was made as a result of Ripples’ motion to dismiss the suit in September. Ripple is basing its argument on the statute of repose where the plaintiff didn’t file any charges within the duration of the statute which ended in 2016. This argument was made in a filing in September this year based on the fact that the suit has expired.
In context, Sostack makes claims about Ripples’ argument claiming that Ripple Labs should still be held responsible for the illegal sales of securities. He makes his claim on the further basis of court precedent that the defense (Ripple) relies on an (out-of-circuit) decision that cannot hold water against the recent Supreme Court’s decision that statute of repose runs from the defendants last act upon which culpability is claimed. In this issue, it is the securities offering.
Allegations about XRP being security were filed last year during the summer with Sostack and his law firm Susman Godfrey and Taylor-Copeland Law. This year, however, a further filing was made (an amended class action complaint) on the same issue comparing the Securities and Exchange Commission’s framework on the concerning cryptocurrencies alleging that XRP is security on that basis.
While Ripple kept mute on these allegations, it made its response based on a lack of response during the duration of the statute of repose, in essence, trying to void the basis for the argument of the plaintiff.
Though a thorny issue, the consideration of XRP being a token or not has been squared severally by the CEO Brad Garlinghouse who has said many times that XRP cannot be considered to be a security.
The implications of suits such as this one are enormous because Sostack is part of a group of investors who have felt that they have been misled by the cryptocurrency startup. Processes that involve the handover f money such as this one always come with their commensurate measure of risk. New technologies often go through a period of chaos before they settle down and that’s when the public sees it as safe to dip their toes in.
Already, this year we have seen the response of the U.S. SEC who hasn’t dealt too kindly with other blockchain startups. The settlement of Block.one and the postponement of Telegram’s TON offering also point to a seemingly hostile SEC.
How the SEC will respond remains yet to be seen in the case of Ripple as the blockchain startup seems to be the darling of financial institutions at the moment. So, things may be expected to be different in this case, however, that remains yet to be seen for now.