US Federal Court Advances Securities Lawsuit Against Ripple Labs, CEO Accused of Misleading Statements
Summary:
A civil securities lawsuit against Ripple Labs has been approved by a US federal court. Accusations of Ripple CEO Brad Garlinghouse making misleading remarks in 2017 will be deliberated by a jury. The original argument of Ripple that XRP is not a security under the Howey test has been disputed by Judge Phyllis Hamilton. She suggests that non-institutional investors might consider XRP a security, expecting returns from Ripple's efforts.
A US federal court has given the go-ahead for a securities lawsuit against Ripple Labs. The case claims that the company's CEO violated Californian securities laws and will now be determined by a jury. Judge Phyllis Hamilton of the California District Court gave the order on 20th June, alleging that Ripple's CEO, Brad Garlinghouse, gave out misleading information during an interview in 2017. However, four allegations regarding Ripple's failure to register XRP as a security have been dismissed.
In the said interview, which was aired on Canada's BNN Bloomberg, Garlinghouse claimed a high-stake investment in XRP. Contrastingly, the suit alleges Garlinghouse's assertion was untrue as he sold a huge amount of XRP the same year.
Judge Hamilton disagreed with Ripple's argument that the misleading statement claim be dropped on the grounds that XRP doesn't qualify as a security under the Howey test. Referring to a significant ruling by Judge Analisa Torres in July 2023 during a Securities and Exchange Commission lawsuit, Hamilton asserted in her recent order that XRP might qualify as a security when sold to non-institutional investors. This subset of investors, she said, expects profits from Ripple's efforts, an important criterion of the Howey test.
Despite many in the US crypto industry celebrating Judge Torres' ruling as a significant victory last year, hoping it would become a guiding precedent for similar cases, its projected impact hasn't been as substantial.
For instance, in the SEC's case against Terraform Labs, Judge Jed Rakoff of the same courthouse as Judge Torres opposed the Ripple ruling while declining Terraform's plea for dismissal in August. Eventually, Terraform had to pay a settlement of $4.5 billion to the SEC.
Published At
6/21/2024 6:08:25 AM
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