Day before yesterday, we had mentioned Ripple has roped in Mary Jo White, the former chair of the SEC, and Andrew Ceresney, the former Enforcement Chief to assist Ripple the lawsuit filed by a US cryptocurrency investor named Ryan Coffey in the San Francisco County Superior Court.
Now, another investor named Vladi Zakinov has filed a class-action lawsuit against Ripple Labs Inc., Brad Garlinghouse and XRP II LLC. The lawsuit has requested the court to declare Ripple as a security under California law and seeks compensation for the damages.
The lawsuit claims that XRP token, despite being referred to as the ‘token’ is actually a security as it does not filter investors and uses funds to fund the project. According to Zakinov’s lawsuit, XRP token has all the characteristics of a security. Furthermore, the lawsuit alleges that investors have no control over Ripple and XRP, making the investments extremely risky.
Zakinov, the plaintiff, had used Ethereum (ETH) cryptocurrency to purchase XRP tokens. He bought 519 XRP tokens in total when the token was trading at about $1 and continue to hold it. The plaintiff has stated that he has invested in XRP with the hope of an appreciation in the price. The lawsuit says that the San Francisco-based company have “promoted XRP and conflated the value of XRP with other software efforts”. The lawsuit also alleges that Ripple uses XRP to fund its business operations and market its network. The lawsuit says
“[…]This allows Ripple to have a spectacularly skilled team to develop and promote the Ripple protocol and network…On information and belief, the sale of XRP substantially dwarfs any other source of revenue for the company.”
According to Zakinov, Ripple has “focused on how to create, maintain, and increase the value of XRP.” Furthermore, the lawsuit has pointed out that Ripple has 80 billion XRP and continues to run a “never-ending ICO”. Notably, the lawsuit also claims that Ripple is not decentralized.
The lawsuit also alleges that Ripple tries to manipulate the value of XRP by “continuously touting it in the press and obscuring the role of the security.” As an example of Ripple’s aggressive marketing strategy, the plaintiff has provided links to “How to buy XRP” section on the website. Zakinov believes that artificial demand is created through aggressive marketing. To strengthen the argument, the lawsuit has also listed the statements issued by Brad Garlinghouse on various occasions as an attempt to push Ripple into the market and increase the value of its token.
The lawsuit represents all the investors in California due its class-action status. The plaintiff has stated that as the number of investors is large, it is practically impossible to bring all the investors under a single roof while filing the lawsuit.
Zakinov has asked compensation for the damages and costs incurred to fight the court case. Additionally, he has also requested the court to declare XRP as a security and be subject to the California Corporation Code.
The lawsuits and investigations by CFTC for alleged price manipulation indicates that the US SEC may soon declare most of the cryptocurrencies as securities.