Ripple Hit With 3rd Lawsuit in Three Months, Accused of Security Fraud
Ripple Labs Inc. and its CEO have been served with their third securities fraud lawsuit in just three months.
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The latest lawsuit, filed on June 27, alleges that Ripple Labs Inc. and its CEO Bradley Garlinghouse have conflated a private XRP investor’s token with its proprietary Ripple technology and even illegally profited from price increases.
XRP’s centralized and mining-free distribution model is said to have contributed to an extended ICO period which has resulted in the funding of Ripple up to $100 million.
From Law.com:
The most recent class action, however, goes into greater detail than the others in describing how Ripple Labs allegedly influences XRP to raise its price. This allegation could prove pivotal to determining whether XRP meets the “Howey test” definition of a security as an investment whose profits come from the actions of others. The “Howey test” is a standard set forth by the U.S. Supreme Court in SEC v. Howey that defines an “investment contract,” essentially a security, as having several distinct characteristics.
Additionally, the suit details several mechanisms used by Ripple to increase XRP’s price. For instance, it singles out the company’s May 2017 move to place 55 million XRP units in a cryptographically secure escrow account and slowly sell the units over time. According to Ripple, the escrow account was created to remove uncertainty over the notion that Ripple would sell its 61 billion units of XRP all in one go.
Ripple is powered by XRP. It is more known for its digital payment protocol than its cryptocurrency. It operates on an open source and peer-to-peer decentralized platform that allows for a seamless transfer of money in any form, whether USD, Yen, litecoin, or bitcoin.
- Aaron Goldstein, Gambling911.com
