A new lawsuit has been filed against Ripple and its CEO Bradley Garlinghouse at a court in California. The plaintiff in this case David Oconer is seeking to have Ripple termed a security. He has insisted that the token should be classed as a security with respect to the way Ripple has been managing and distributing it.
XRP Potentially A Security
The plaintiff who is a private investor in XRP has insisted that the way the token is managed and distributed makes it behave like a traditional security. The suit goes on to claim that Ripple’s CEO and its labs have been boosting the token’s price by using limited distribution as a tactic to do so.
The lawsuit says that XRP has been offering and selling a token that exhibits all the characteristics of a traditional security but has not been registered as such. The filing goes on to say that the buying of XRP constitutes making an investment contract with XRP, with the purchasers providing currency for the exchange of XRP.
Never- Ending Legal Battles
This recent suit brings the number of class action lawsuits leveled against Ripple to three. All of these lawsuits accuse Ripple of utilizing a security as a coin and taking advantage of the token’s centralized nature and mining free distribution method to run an ICO (initial Coin Offering) indefinitely. Through this ICO, the company is said to have managed to raise a total of $100 million in the fourth quarter of 2017.
The company and its upper management officials have repeatedly rebutted the insinuation that XRP is a security. The company’s chief market strategist Cory Johnson in April reiterated that the token could not be termed as a security as it did not fulfill the criteria which securities are based on.
In the meantime, the United States SEC (Securities and Exchange Commission) has not commented on this situation. William Hinman, who is at the helm of commission’s Corporation Finance Division, has only commented on Ethereum, saying that the commission would not treat it as a security. He, however, did not mention anything about Ripple’s current situation.
A Weighty Outcome
Should XRP be found guilty of running a never-ending Initial coin
offering under the SEC’s authority, leading to the successful prosecution of all the three cases, an important precedent will have been set for the whole Cryptocurrency space.
While attending the CB Insights Future of Fintech that was held in the big apple, Ripple’s CEO put forth three as to why XRP should not be deemed a security. These were:
1. He pointed out that XRP ledger ran on an open source decentralized technology that would continue to exist even if the company itself closed down.
2. He said that the people who buy into Ripple understand that they are not buying into the company, their ownership of the token does not entitle them to any dividends or profits made by the company.
3. He added that XRP had utility as it was solving a problem, a characteristic that securities do not have.