Ripple has recently filed for a motion to dismiss a lawsuit for allegedly selling XRP tokens as unregistered securities.
September 10, 2019, | AtoZ Markets – The California-based company Ripple, the blockchain company behind the XRP cryptocurrency recently filed a controversial motion to throw out a class-action lawsuit it is facing for allegedly selling unregistered securities.
Ripple: Investor’s lawsuit was filed too late
In May 2018, a group of XRP investors filed a lawsuit against Ripple and its executives, claiming that they violated state and federal securities laws. On August 5, 2019, the group again filed an amended complaint, arguing that XRP tokens are unregistered securities under the Securities and Exchange Commission’s (SEC) guidance.
In a 37-page filing posted early Friday, lawyers representing Ripple in the battle against one of the investors, Bradley Sostack dismissed the claims against it. Sostack claims that Ripple’s sales of XRP in 2013 constituted an unlawful securities offering.
Ripple refuted his allegations, saying that the plaintiff does not have the standing to file a complaint and that the lawsuit was filed too late.
“Under Plaintiff’s own allegations, Defendants offered XRP to the public throughout 2013 through 2015. Accordingly, the three-year statute of repose expired as of 2016 (three years after the sales cited in the May 2015 settlement) and in no case later than May 2018 (three years after the May 2015 settlement agreement in which “Defendants acknowledged that they had sold XRP to the general public,” […]. The Securities Act claims in the Complaint, filed August 5, 2019, are therefore untimely and barred by the statute of repose,” the filing reads.”
The filing also says that the plaintiff does not claim to have bought XRP directly from Ripple or another defendant, but rather, “he was part of the ‘general public’ who purchased XRP through transactions in a two-week period in January 2018.”
XRP is not a security
Notably, the argument over why XRP is not a security was not addressed in the motion to dismiss and this has raised fresh suspicions. Indeed, the filing only addresses the question in a footnote, which states that XRP is not a security “because it is not an ‘investment contract.’”
The filing also reads:
“Purchasing XRP is not an ‘investment’ in Ripple; there is no common enterprise between Ripple and XRP purchasers; there was no promise that Ripple would help generate profits for XRP holders, and the XRP Ledger is decentralized.”
Ripple further said that XRP is a currency and that the court itself does not need to determine whether the securities laws apply to XRP.
In the meantime, the SEC has signaled that Bitcoin and Ethereum are exempt from securities laws, but has left the status of others like XRP in limbo. At the same time, regulators in the U.K. last month suggested XRP is not a security.
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