Ripple, its CEO Bradley Garlinghouse, and subsidiary XRP II, LLC find themselves at the center of a class action lawsuit. As per a recent notice, the defendants are accused of breaking federal and California securities laws by offering and selling XRP without proper registration.
The Legal Claims
Fox Business journalist Eleanor Terrett revealed in a recent X post that she had received some messages regarding a class action lawsuit against Ripple and its boss, Brad Garlinghouse. “This appears to be a notice to investors about a lawsuit pending in a Northern California district court that claims the defendants violated federal and California securities laws by offering selling XRP,” she added.
The plaintiffs allege that Ripple conducted the unauthorized sale of the XRP token, evading the compulsory registration required under both federal and state securities laws.
The lawsuit seeks to represent two separate groups: the Federal Securities Claims Class and the California State Securities Claims Class. These classes entail all individuals or entities who bought XRP between July 3, 2017, and June 30, 2023, and are either still holding the asset or sold it at a loss.
Notably, Ripple and the co-defendants have disputed these allegations, maintaining that XRP is not a security and, thus, they were not required to register it.
What Next?
The class action could potentially lead to a drawn-out legal scuffle.
As of now, the affected parties could either remain in the case for potential settlement benefits or pull out to pursue independent legal action against Ripple, Garlinghouse, and XRP II, LLC. The deadline for exclusion requests is April 5, 2024, with a trial slated for October 2024, where the plaintiffs must substantiate their claims sufficiently.
This new legal hurdle comes amid an ongoing spat between Ripple and the U.S. Securities and Exchange Commission (SEC). The regulator slapped Ripple, Brad Garlinghouse, and executive chairman Chris Larsen with a $1.3 billion suit in late 2020, alleging the parties offered unregistered securities through XRP tokens.
In July 2023, Judge Torres granted summary judgment in favor of Ripple, proclaiming that XRP was only a security when sold to institutional investors. The SEC later dropped charges against Garlinghouse and Larsen but not Ripple. The firm recently handed over financial statements for 2022-2023 along with contracts governing institutional sales since the case was lodged, fulfilling a request previously made by the Wall Street top financial watchdog.
Apart from the legal drama, Garlinghouse said in a recent interview that Ripple would “welcome” an exchange-traded fund (ETF) based on XRP.
