Following a lawsuit filed by the SEC and other federal authorities against Ripple Labs for an unauthorized sale of securities, there is now another lawsuit against the company. A class-action lawsuit has been filed in Florida against Ripple Labs, Brad Garlinghouse (CEO), and a subsidiary, XRP II LLC. The claimants allege that Ripple sold tens of millions of dollars in XRP without notifying the Florida authorities. They assert that XRP tokens are practically securities. Thus, securities trading must be registered by the authorities and otherwise is considered illegal.
A class-action lawsuit was filed by Tyler Toomey, a Florida citizen who wasn’t the largest investor. According to the lawsuit, he owned 135 XRP (then worth around $100) in November 2020, which he sold in December with a 50% loss.
SEC Lawsuit Against Ripple Labs
In December of last year, the SEC filed a lawsuit against Ripple Labs and those responsible. The charge — illegal sale of securities in a form of XRP tokens. Whether XRP is securities or not has always been a matter of dispute. Today, there are different points of view of both investors and regulators. Brad Garlinghouse, CEO of Ripple Labs, challenged the prosecution vigorously and intended to defend his company.
He accused the SEC of launching an attack on the entire cryptocurrency sector. According to Garlinghouse, who is generally dissatisfied with the regulations in the USA and is about to move, there are no equal competitive conditions for different companies. If Ripple loses to the SEC, it would likely ruin XRP.
What Are Securities?
Securities stand for a share, ie stake in a company. Securities have a monetary value and represent direct ownership of a stake in a company. Cryptocurrency projects that are financed through an ICO, for example, always run the risk of falling into this category. Every security must be registered by the SEC, otherwise heavy fines are threatening to a company.
However, Ripple (XRP) never did this, although many assume that XRP is actually a security. The SEC’s lawsuit also criticized other potentially illegal practices, such as market-making to artificially preserve the price and suspicious XRP donations to various foundations.
Conclusion: Uncertain Future for Ripple Labs
The future of Ripple Labs and the XRP token is uncertain at this point. A verdict against Ripple Labs could mean the end for the company. So far, some large crypto exchanges have already stopped trading XRP in order to protect themselves legally. However, Ripple Labs is trying to do the best to protect its reputation.
What will happen next? Meanwhile, we can only wait for news. What do you guys think? Feel free to share your ideas and thoughts in the comments!