The Takeaway:A new amended complaint against Ripple draws on the SEC’s framework for digital assets to outline how XRP might be a security – likely the first federal case to do so. The filing also cites California advertising law, in addition to federal securities law, to argue that investors were misled by Ripple’s promotion of XRP. While the case is a year old and has not yet received class-action status, the new complaint is the first that Ripple must respond to with a substantive answer. Ripple has until mid-September to file its response.
Investors in the cryptocurrency XRP have filed a new complaint against Ripple that marshals the Securities and Exchange Commission’s own words to argue that the startup illegally sold unregistered securities.
The amended complaint, filed Aug. 5 in a year-old lawsuit against Ripple, includes several new arguments and may be the first federal case to cite the SEC’s guidance for applying existing law and regulation to crypto tokens.
It also marks the first filing to which Ripple must directly respond by addressing the facts of the case. Four previous complaints were filed in California state court, but the company successfully moved to have these cases consolidated and shifted to federal court. Ripple has until Sept. 19 to file a response.
“That filing will be the first time in the already-long history of this litigation that Ripple will substantively respond to the allegations around XRP,” said Jake Chervinsky, general counsel at crypto lending startup Compound Finance.
The company has been in the legal crosshairs since May 2018, when investor Ryan Coffey filed the first of several lawsuits seeking class-action status against Ripple Labs, subsidiary XRP II, CEO Brad Garlinghouse and other individuals. XRP, which Ripple periodically sells, has “all the traditional hallmarks of a security,” Coffey claimed.
Investors Vladi Zakinov, Avner Greenwald and D...