American Ryan Coffey filed a lawsuit against Ripple in San Francisco County Superior Court, seeking damages from Ripple “on behalf of all investors.” Coffey argues that the company's actively promoted XRP token is an unregistered security that is being illegally offered to investors.
The complaint details Ripple's questionable business practices, which allegedly create "billions of coins out of thin air" resulting in a "never-ending" ICO raising money for the company.
Even though XRP's market capitalization rose to $140 billion in January but then fell below $35 billion, Coffey himself did not lose a significant amount of investment as he bought 650 XRP tokens at 2.60 and sold them for $1.70 a few weeks later. The amount lost according to the complaint is therefore approximately $580.00. But one of the points in the lawsuit is that the plaintiff did not expect to lose his investment due to Ripple Labs' advertising practices. According to him, buyers of XRP expected to make a profit on their investment, based on aggressive advertising and promotion of the coin by the defendants themselves. At the same time, the stated information did not correspond to reality and stimulated an increase in demand for XRP, for their own profit Ripple.”
The lawsuit says the defendants violated the Securities Act and the California Corporations Code by essentially conducting a “never-ending ICO,” which should be classified as a sale of securities. The plaintiffs are asking to pay all investment losses incurred and to declare the sale of XRP an illegal sale of securities.
On this occasion, the head of corporate communications at Ripple noted that only SEC can decide whether XRP is a security or not. In his view, XRP is not.
On Tuesday, Ryan Zagone, Ripple's chief legal officer, told a UK parliamentary committee that "We did not create XRP... What we do is we own a significant amount of XRP, it was gifted to us by some of the developers who created it. But there is no direct connection between Ripple and the XRP company.”
This statement leads to further confusion as the Ripple website devotes a full section to XRP, along with mentioning their association with the token..
Experts note that the trial may set a precedent, despite the insignificance of the amount of the claim on an industry scale. The very possibility of suing Ripple is not consistent with the principles of decentralization of digital currencies.
At the end of April, former Goldman Sachs partner and US regulator Gary Gensler said that he believes that XRP and Ethereum (ETH) should be considered securities under US law.
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