A federal judge is green-lighting the much-publicized unregistered-security lawsuit against Ripple.
Bradley Sostack is accusing the company of illegally selling XRP as an unregistered security. Ripple claims XRP is not a security and says the claims are unsubstantiated.
The company filed a motion to dismiss the lawsuit, saying that even if XRP was a security, any lawsuit on the issue would violate the statute of limitations and should have been filed within three years of the 2013 initial offering of XRP.
Sostack’s legal team argues that the statute of limitations is invalidated by the fact that Ripple continues to sell the digital asset.
Now, US District Judge Phyllis J. Hamilton has determined that Ripple “did not make their first bona fide public offering of XRP before August 5, 2016 (three years prior to plaintiff’s filing of his federal securities claims in this action on August 5, 2019),” according to the order.
Says the judge,
“While defendants did acknowledge various 2013 offers and sales in their May 2015 settlement with the USAO, the sales activity identified in that settlement does not show that defendants targeted the general public when offering to sell XRP. Instead, the activity identified in that agreement either shows that defendant attempted or consummated particular transactions with specific third-party individuals or entities,… or generally refers to the existence of defendants’ sales activity without defining the scope of the market for such sales.”
Ripple says the lawsuit could damage the XRP market. The company has argued in the past that classifying XRP as a security could destroy the third-largest cryptocurrency’s entire marketplace.
The company’s legal team has filed a motion to dismiss the lawsuit.
“Were [Sostack] allowed to belatedly challenge the classification of XRP, it would not only threaten to eliminate XRP’s utility as a currency, but it would upend and threaten to destroy the established XRP market more broadly — a market involving over $500 billion in trading over the last two years… — potentially wiping out the value held by the alleged thousands of individual XRP holders around the world (many of whom no doubt disagree with [Sostack’s] claim that XRP is a security).”
The judge also dismissed claims of personal liability against Ripple CEO Brad Garlinghouse and claims of false advertising from Ripple. A claim that Ripple violated California state law was also dismissed, granting the plaintiff 28 days to refile that portion of the lawsuit in the state.
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