A law firm, Taylor-Copeland Law has filed a class action lawsuit against the creators of Ripple and the company stating that the company violates the United States securities laws. The lawsuit has been filed against Ripple, XRP II, and CEO Brad Garlinghouse. The case came about with the plaintiff, Ryan Coffey, an individual investor, who had purchased 650 XRP on January 5, 2018, and then sold it on January 18, 2018, for Tether (USDT) for a good profit. When he finally converted the currency to U.S dollars, he suffered a loss of $551.89 or 32% from the actual sell-off.
As per the details of the lawsuit, the plaintiff had not expected to lose money on this investment as he had sold it in profit. Yet, he had made some fatal errors of judgment which seemed to have been overlooked. The plaintiff and the lawsuit are hoping to cash on the debate if the defendants are in violation of California Corporations Code and the Securities Act and are asking the court to declare the sale of Ripple (XRP) as an unregistered security.
Ripple has been doing well with its adoption in various use-cases and has created a client base of 100 financial institutions utilizing its blockchain for transactional settlements. However, the company has been facing a barrage of questions from the cryptocurrency community on how it will manage to differentiate its currency, XRP, from other cryptocurrencies. Other cryptocurrencies come under the ambit of a “security” under the U.S regulations. The holders of these currencies have to pay taxes as per the security laws as declared by U.S Securities and Exchange Commission (SEC). Yet, Ripple Labs believes itself to be a blockchain technology more than a currency. This is where the controversy has erupted.
The company spokesperson clarified that Ripple does not fall under the U. S SEC laws. According to Director of Ripple’s Regulatory Relations, Ryan Zagone, “there’s no direct connection between Ripple the company and XRP.”
People had mixed responses on social media to the lawsuit some finding it “unnecessary”.
Popularity of Ripple
Ripple is a promising investment currently trading at $0.81650000 hovering up almost 2.22% in the last 3 to 4 days and has slid again. It is also the third largest virtual currency by market capitalization of $32.62 billion.
Unlike other cryptocurrencies, Ripple is not decentralized, Ripple is essentially a private Blockchain created by the banks with permission for their personal use. They simply use it for transactional purposes and hence it is not so distributed. Banks own 70% of the value, hence they can inflate and deflate the price as they wish. But it is a super-fast blockchain and has the potential to revolutionize the banking system and international money transfer.
As reported earlier, one of the setbacks Ripple might face is the issue of its centralized nature. The network is controlled by a single company, even though it might call the technology “decentralized”. This will classify Ripple as-as “security” under U.S laws and will become a hot potato for cryptocurrency exchanges as it will be engulfed by stricture rules and regulations. SEC has time and again asked these companies to clarify the usage and purpose of the new coins to ensure the right category.