Brad Garlinghouse and Ripple Labs Inc. are the subjects of another lawsuit by a disgruntled investor who claims the token is, in fact, a security.
Due to the nature of the XRP token being offered for sale to the public and using funds raised from the sale of XRP for funding, plaintiff Vladi Zakinov claims the XRP token is a security. The complaint goes on to suggest that since investors are unable to have a say in the success or failure of Ripple, the investment is a serious risk.
This new lawsuit is a class-action lawsuit and as such represents all California citizens since January 1st, 2013. It demands compensation for the plaintiff for damages and reasonable costs and expenses.
Earlier this year a similar lawsuit was filed against the token by Ryan Coffey after he lost money with his XRP investment.
The basis of the lawsuits lies in allegations that the value of XRP is controlled by the defendants and is derived from their efforts on behalf of the common enterprise. It claims that Ripple is not decentralized and plans to sell its 80 billion XRP tokens in a never-ending ICO.
It also alleges that Ripple uses an aggressive marketing scheme to build demand and that statements made by Garlinghouse in interviews are intended to increase the value of XRP.
Due to a lack of regulatory clarity in the United States regarding the status of cryptocurrencies, lawsuits such as these pose a legal quagmire for the judicial system. Pressure is mounting on the SEC to change documentation outlining terms and definitions for the ever-growing crypto market.
In a recent report, Jay Clayton, Chairman of the Securities and Exchange Commission made it clear that the agency won’t be changing the rules of what defines a security for the cryptocurrency market. It remains defiant in its stance that digital assets that raise funds through initial coin offerings (ICO) are securities by definition.
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