The reach of Ripple’s network and the XRP cryptocurrency are broad, and the speed of these transactions has been applauded by a very loyal community. However, the court case regarding the security classification of Ripple continues, with no real clarity over if XRP can even be considered a security. As the court hearing date looms, Ripple argues against the claims made by the plaintiffs yet again.
- Ripple states that the plaintiffs are outside of the required timeframe to base their allegations on the “first offered” rule.
- Statements from the plaintiffs’ amended complaint directly contradict claims from the original complaint.
The court case over whether XRP should be considered a security has been going on for months, but Ripple isn’t done yet. In a new filing on December 4th, Ripple poked holes in the statements made by the plaintiffs, arguing that the arguments they’ve made are contradictory to their original claim, as reported by CoinDesk. Furthermore, even if XRP could be classified as a security by the regulators, the investors going after Ripple now would’ve far passed the timing necessary to even proceed with the case.
The document, which was filed with the US District Court for the Northern District of California, is just the latest in a slew of others filed in the case, which includes Bradley Sostack as the lead plaintiff. The amendment to the original complaint was filed in August this year, wherein the group of the plaintiffs state that the company had been selling XRP to retail investors as an unregulated security. The Securities and Exchange Commission (SEC) expressly prohibits unregulated securities.
Much of the filing repeats the arguments that Ripple has already made – that the new complaint missed their required deadline, that there’s still no proof that the Sostack actually purchased XRP at all, and that XRP’s alleged security status conflicts with the state consumer protection law in California. However, the question of whether XRP is actually a security is still technically not addressed.
The filing stated, “XRP is not a security, but that is irrelevant for purposes of this motion. Even if XRP were a security, Plaintiff’s claims still fail as a matter of law.” This is the last filing that Ripple has the chance to push for dismissal before the court hearing next month.
Even with the claims by Sostack that Ripple had continually engaged in offering securities, the first sale of XRP by Ripple was in 2013. The filing pointed out that any of the cases brought against the company outside of the three-year statute of repose shouldn’t even be considered, and that it “does not upend the ‘first offered’ rule.” Additional court cases to support these statements were included in the document, like that of many mortgage-based securities cases a few years ago, according to Rebecca Rettig.
The conflict that Ripple points out in Sostack’s argument comes from a statement in a November 4th filing of the plaintiff’s response. The response stated, “Ripple issues new XRP from escrow for the first time each month for sale to the public.” However, the original amended complaint from the plaintiff stated that every single XRP was created in 2013 “out of thin air,” before it was offered to investors.
The filing also claims that Ripple directly sold the XRP to the plaintiff, which is very unlikely, considering the movement of the XRP tokens on many platforms. The filing stated, “Ripple’s alleged exchange sales of XRP accounted for .095 percent—less than one-tenth of one percent—of the total volume of XRP sold on exchanges.” This covers the time when Sostack claims that he purchased XRP, though there still has yet to be proof that he actually did so.
The court will hear this case again on January 15th, 2020. Consumers can subscribe to SCRIBD for a free 30-day trial to read the whole thing.