Ripple Labs and its CEO Brad Garlinghouse were sued by a Ripple investor earlier this week in the state of California. The official document of the lawsuit revealed that the investor is suing Ripple based on the premise that XRP should be considered a security.
Ryan Coffey, the lead plaintiff of the lawsuit, stated in the document that he had purchased 650 XRP on January 6, 2018 at a rate of $2.60 per XRP and sold the XRP that he had bought for $1.70 per XRP merely 12 days later. Coffey bought $1,690 worth of XRP and sold it 12 days later at a loss of $889.
Coffey claimed that the Ripple blockchain protocol’s native token XRP should not be traded on major cryptocurrency exchanges, because unlike bitcoin and Ethereum, XRP is not mineable and was wholly created by Ripple Labs. The lawsuit alleged Ripple Labs for violating securities regulations by distributing XRP on major exchanges.
“Unlike cryptocurrencies such as Bitcoin and Ethereum, which are mined by those validating transactions on their networks, all 100 billion of the XRP in existence were created out of thin air by Ripple Labs at its inception in 2013. n other words, unlike some virtual currencies, XRP was fully generated prior to its distribution. 20 billion XRP, or 20 percent of the total XRP supply, were given to the individual founders of Ripple Labs, with the remaining 80 billion retained by Ripple Labs,” the lawsuit read.
The plaintiff also alleged Ripple for bribing Coinbase and Gemini, two of the biggest cryptocurrency brokers and exchanges in the US, to be listed on their platforms, claiming that the investors of XRP should be compensated for their losses given that Ripple Labs engaged in bribery and illcit distribution of securities.
“Defendants also reportedly offered to bribe popular U.S.-based cryptocurrency exchanges Coinbase, Inc. (“Coinbase”) and Gemini Trust Company, LLC (“Gemini”) to list XRP. In or about the fall of 2017, Ripple Labs is reported to have offered Coinbase more than $100 million worth of XRP to start letting users trade XRP. A Ripple executive is also reported to have asked whether a $1 million cash payment could persuade Gemini to list XRP in the third quarter of 2017,” the plaintiff claimed.
Essentially, the lawsuit of Coffey argues that the US Securities and Exchange Commission (SEC) should consider XRP a security and should crackdown on the distribution of XRP. But, Ripple has been cooperating with the largest consortium of banks globally, with more than 100 banks from Japan and South Korea led by SBI Holdings, and major banks from the US and Europe including Barclays.
The lawsuit claims all of these banks have also engaged in illicit distribution of securities and suggests that all of the cryptocurrency exchanges in the global market such as Binance and Bitfinex should be punished accordingly.
But, the basis of the lawsuit is on the $889 loss of an individual investor who purchased XRP at his own risk on a public trading platform. Due to the sensitivity of the accusations brought upon by the plaintiff and the premise of the lawsuit surrounding a $889 loss in an individual trade led investors and analysts in the cryptocurrency market to disregard the case and suggest that the investor is carrying out a desperate attempt to target a multi-billion dollar company with a trivial lawsuit.