Ripple facing class-action lawsuit in California

Ripple facing class-action lawsuit in California

The suit follows comments made by Ripple’s CEO in 2017

A US federal court judge is going forward with the civil securities lawsuit against Ripple Labs, rejecting its summary judgment in the case alleging that CEO Brad Garlinghouse violated California securities law.

Judge Phyllis Hamilton of the US District Court for California’s Northern District issued the order on June 20, meaning the case of whether the CEO made “misleading statements” in a 2017 interview will go before a jury. Four allegations regarding Ripple’s “failure to register XRP as a security” have already been thrown out.

Garlinghouse said in a 2017 interview on BNN Bloomberg in Canada that he was “very, very long” on XRP. However, the suit claims that statement was untrue as the CEO allegedly “sold millions of XRP” that year.

Judge Hamilton noted in the order that Ripple requested the “misleading statement” allegation be thrown out, as XRP is not considered a security under the Howey test. This highlights the July 2023 landmark case ruled on by Judge Analisa Torres in the suit between the SEC and Ripple.

However, the judge disagreed, finding that XRP could be a security if purchased by non-institutional investors. Profits would have been expected from Ripple, an indicator employed in the Howey test.

“Accordingly, the [court] cannot find as a matter of law that Ripple’s conduct would not have led a reasonable investor to have an expectation of profit due to the efforts of others,” wrote Hamilton.

Ripple Chief Legal Officer Stu Alderoty stated, “The ruling from Judge Torres in the SEC case still stands, and nothing here disturbs that decision.”

Many crypto industry experts consider Torres’ decision a big win for the industry, believing it will set a precedent for future crypto cases.

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