Ripple Lawsuit Narrows to Single Claim of Misleading Promotion by CEO

News | July 4, 2024 By:

On Thursday, June 20, 2024, the US District Court for the Northern District of California issued an order granting in part and denying in part a motion for summary judgment filed by Ripple Labs, a blockchain-based payments company, and its executives, including CEO Brad Garlinghouse.

The case involves securities law claims against Ripple Labs and Ripple’s CEO Brad Garlinghouse. The claims center around allegations that XRP was offered and sold as an unregistered security. A class of investors who purchased XRP are seeking damages for the failure to register XRP as a security with the SEC as required by law. Additionally, the lead plaintiff Bradley Sostack has an individual claim against Garlinghouse for alleged misleading statements made in promoting XRP.

In its order, the court granted summary judgment to dismiss most of the claims. It ruled that the federal securities law claims on behalf of the certified federal securities class are barred by the statute of repose in the Securities Act. The evidence showed XRP was offered to the public as early as 2013 through sales on cryptocurrency exchanges, well over the three-year limit.

The court also granted summary judgment on the state securities law claims on behalf of the California subclass. It found the plaintiff failed to provide sufficient evidence of “privity”, a requirement under California law that limits recovery to direct purchasers from the issuer. While the plaintiff argued two of his purchases came from a market maker selling on Ripple’s behalf, the court said this only represented a small fraction of the plaintiff’s total XRP purchases, and he did not prove the market maker was acting as Ripple’s agent in those specific transactions.

However, the court did deny summary judgment on the individual claim of misleading statements against Garlinghouse. This claim involved an alleged false statement by Garlinghouse in a 2017 interview that he was “very long on XRP”, despite having sold millions worth that year. The court said factual issues remain over whether XRP meets the test of an “investment contract” and thus a security under federal law.

The case appears headed to trial on the sole remaining individual claim unless the parties choose to settle. The court order represents a major win for Ripple by dismissing the bulk of the class action claims but leaves open the potential for liability over Garlinghouse’s past promotional statements regarding XRP.

Please contact BlockTribune for access to a copy of this filing.