Third Lawsuit Filed Against Ripple Labs

The US Securities and Exchange Commission considered Bitcoin and Ethereum as commodities, thus laws and regulations applied on stocks are not applicable to the two digital currencies. On the other hand, Ripple’s XRP is in a limbo. There’s a lawsuit against Ripple claiming that it is indeed a security.

Unfortunately, it doesn’t end there. The latest lawsuit is filed by law firm Robbins Arroyo. This time around, Ripple was hit by a class action securities fraud lawsuit in California. It is the third class action lawsuit against the company. It claims that XRP is actually a security and should be subject to California’s Corporations Code.

Filed on June 27 in San Mateo County Superior Court, this lawsuit came two weeks from another lawsuit that was filed against Ripple. The latest lawsuit argues that since Ripple Labs manages and distributes XRP in a centralized manner, XRP is a security and is committing violations of the securities laws.

What Makes the Third Lawsuit Different?

The third lawsuit is somewhat different considering that it goes into detail describing exactly how Ripple Labs is allegedly influencing the price of XRP. And this allegation could be a deal breaker whether or not XRP is going to meet the “Howey Test” the litmus test that ultimately determines a security from a commodity.

Though there are some reasons to consider Ripple as a commodity just like Bitcoin and Ethereum, Ripple is currently bearish because of these lawsuits. Ripple is represented by former Securities and Exchange Commission chair Mary Jo White and ex-SEC enforcement chief Andrew Ceresney.

The lawyers of the recent lawsuit claim that Ripple’s CEO, vice president, and product manager all promoted the cryptocurrency on their twitter in order to increase the value of XRP. There are also mechanisms mentioned in the lawsuit that Ripple used in order to increase XRP’s price. For instance, you have the fact that the company in May 2017 moved to 55 million XRP units in escrow and sold the units over time.

However, Ripple answered that the cryptocurrencies were brought to a secured escrow account in order to remove the uncertainty that Ripple is selling all 61 billion units of cryptocurrencies in one go. However, the complainant is adamant that it was done in order to “drive price appreciation” and “maximize profits from XRP sales”.

Things Aren’t Looking Good For XRP

Just when regulatory changes are bringing clarity to cryptos such as Bitcoin and Ethereum, XRP is still in a limbo whether or not it is a security or a commodity. In addition to this, Western Union also announced that Ripple hasn’t helped in lowering the cost of cross-border transactions.

Despite the donation made in order to buy classroom supplies, not to mention having an endorsement from Ashton Kutcher, it still hasn’t made XRP look good recently. In fact, some experts are looking at Ripple in a negative way for doing these donations. There are those who see Ripple as donating XRP in order for XRP to be used. For instance, in October 2017, Ripple gave $300 million worth of XRP into the RippleNet Accelerator Program which is a program that was ultimately designed to reward financial institutions that are using Ripple-related products.