Ripple Hit With Lawsuit Over Its XRP Tokens

May 10, 2018         By: Steven Anderson

One of the biggest growth stories in cryptocurrency in 2017, and even a bit into 2018, was Ripple, or XRP. Still affordable by most any standard, the cryptocurrency saw big gains and made itself into something of a crypto success story. Now, the darker chapters of that success story have arrived as the company behind Ripple, Ripple Labs, is now fending off a lawsuit about the XRP token.

The lawsuit—which recently hit The Superior Court of California—reportedly notes that the company allegedly created several billion XRP tokens “out of thin air”, and then sold these tokens off, profiting substantially. The result was what amounted to “…essentially a never-ending initial coin offering”, according to the lawsuit from plaintiff Ryan Coffey.

Coffey bought 650 XRP tokens for about $2.60 each back in the earlier going of the year, and is seeking unspecified damages from Ripple Labs. Coffey also wants Ripple Labs—along with Brad Garlinghouse, its CEO—to openly declare that the company sold unregistered securities.  Coffey noted that not only has Ripple Labs “…recognized that XRP investors have a reasonable expectation of profit…”, it also “…publicly touted XRP’s price performance on numerous occasions.”

Ripple Labs’ response to the lawsuit featured spokesman Tom Channick noting: “We’ve seen the lawyer’s tweet about a recently filed lawsuit but have not been served. Like any civil proceeding, we’ll assess the merit or lack of merit to the allegations at the appropriate time. Whether or not XRP is a security is for the SEC to decide. We continue to believe XRP should not be classified as a security.”

The Securities and Exchange Commission (SEC) has already sent subpoenas to companies engaged in ICOs that may have run contrary to law, reports note, so if Ripple Labs hasn’t had one of those, there may not be an issue to begin with. Even if the SEC declares XRP a security, would that declaration come before or after the events took place? If it wasn’t a security when Ripple started selling it, can Coffey’s lawsuit actually have merit?

Only time, and a court of law, will tell how it all comes out. From here, it doesn’t look good for Coffey’s chances of success.