When Ryan Coffey filed a lawsuit against Ripple back in May 2018 claiming XRP was a security, very few people expected that two years later the matter would still be unresolved.
The Coffey lawsuit may have been voluntary dismissed but other lawsuits emerged and are still active. Zakinov v. Ripple Labs Inc has been active since November 2018 while a second lawsuit (Simmons v. Ripple Labs Inc) was filed in March 2020.
On May 1st 2020, Bitcoin Manipulation Abatement LLC filed a lawsuit against Ripple Labs Inc., Bradley Garlinghouse and XRP II, LLC. The lawsuit, filed in the Northern California District Court, claims that Ripple misled investors and sold XRP as an unregistered security in violation of federal law.
The complaint was filed by attorney Pavel Pogodin through his company, Consensus Law, located in Puerto Rico. The plaintiff is Bitcoin Manipulation Abatement LLC, an entity with little to no online presence that was set up in March 2019.
The lawsuit alleges that Defendants are part of a scheme:
“to raise more than a billion dollars through sales of XRP—an unregistered security—to retail investors in violation of the registration provisions of federal and California securities laws with the primary purpose to enrich Ripple’s executives, directors, founders, and affiliates. Additionally, in order to drive demand for and thereby increase profits from the sale of XRP, Defendants have made a litany of false and misleading statements regarding XRP in violation of California’s securities laws, and false advertising and unfair competition laws.”
Bitcoin Manipulation Abatement LLC seeks to “recover damages” and “obtain other relief” related to the alleged violations.
Bitcoin Manipulation Abatement was also the plaintiff behind another class-action lawsuit filed in November against crypto derivatives exchange FTX. That suit, which demanded $150 million from the exchange in exemplary and punitive damages, was dismissed a month later.
While this lawsuit will take months to develop, all eyes are on the Zakinov lawsuit, the oldest such lawsuit currently in courts. The next court date for the Zakinov case is an Initial Case Mgmt Conference on May 28th.
The SEC watches quietly
The U.S. Securities and Exchange Commission (SEC), an independent agency of the U.S. Federal Government, holds primary responsibility for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, which is the nation’s stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States.
While the SEC has taken action in the past against various other projects, it has maintained a quiet stance toward XRP. It did, however, announce that it was going to procure blockchain ledger data to support its efforts to monitor risk, improve compliance, and inform Commission policy with respect to digital assets back in June 2019. While the SEC does not run nodes on its own, it did acquire the services of Nakamoto Terminal LLC for blockchain data. Nakamoto Terminal LLC did not need permission from Ripple or any other entity to run a node. It will be interesting to see how the SEC will make use of this data in the future.