Ripple is facing a new civil securities lawsuit following Judge Phyllis Hamilton’s approval and dismissal of four allegations relating to the failure to register XRP as a security.
The outcome of Ripple’s legal battle hangs in the balance as Judge Phyllis Hamilton of the U.S. District Court for the Northern District of California greenlights a fresh civil securities lawsuit against the blockchain company over an alleged misleading statement made by CEO Brad Garlinghouse.
According to the lawsuit, Garlinghouse made a statement in 2017 that supposedly misled people into investing in XRP.
The recent order, issued on June 20, suggests that a jury will determine whether Garlinghouse’s statement from 2017 misled investors into investing in XRP or not.
In an investigation into the specific comments made during a seven-year-old interview with Business News Network, CNF discovered an excerpt from the transcript where Garlinghouse said:
“I’m long XRP, I’m very, very long XRP as a percentage of my personal balance sheet. . . . . [I am] not long on some of the other [digital] assets, because it is not clear to me what’s the real utility, what problem are they really solving . . . if you’re solving a real problem, if it’s a scaled problem, then I think you have a huge opportunity to continue to grow that. We have been really fortunate obviously, I remain very, very, very long XRP, there is an expression in the industry HODL, instead of hold, it’s HODL… I’m on the HODL side.”
Ripple attempted to defend against this new allegation by arguing that XRP is not a security under the Howey test, and therefore, the claim should be dismissed. The Ripple legal team also referenced a previous ruling by Judge Analisa Torres in July 2023 in the case between Ripple and the SEC to support their argument.
However, Judge Hamilton disagreed, stating that XRP could be considered a security when sold to non-institutional investors. She argued that Ripple’s promotion of the asset through its “XRP in cross-border payments” and other use cases could lead investors to expect profit.
Hamilton stated:
“The court declines to find as a matter of law that a reasonable investor would have derived any expectation of profit from general cryptocurrency market trends, as opposed to Ripple’s efforts to facilitate XRP’s use in cross-border payments, among other things. Accordingly, the [court] cannot find as a matter of law that Ripple’s conduct would not have led a reasonable investor to expect profit due to the efforts of others.”
Prior to this ruling, the court had dismissed four allegations regarding Ripple’s failure to register XRP as a security, as reported by Crypto News Flash. In response, Ripple’s chief legal officer, Stu Alderoty, expressed satisfaction with the court’s decision to dismiss all class action claims. He believes that the one state law claim going to trial will be adequately addressed.
The plaintiff, who did not directly purchase from Ripple and cannot confirm if he even heard the statement before trading, allegedly lost a few hundred dollars. Ripple looks forward to the cross-examination.
As of now, XRP is trading at $0.48, experiencing a 1% decline in the past 24 hours and a 7% decline in the past seven days.