Ripple is trapped in a heavy lawsuit, but the plaintiff – a customer named Bradley Sostack – has ultimately run out of time when it comes to responding to the company’s notion to dismiss, and it’s unclear where things will go from here.
Where is the Ripple Suit Headed?
The lawsuit stems not just from Sostack, but from several customers who seem to think that Ripple is a security and failed to appropriately register. They claim that the company has employed false advertising and that the currency is not what executives say it is.
On top of that, more than 50 percent of Ripple is still owned by those who reign at the top of the XRP ladder, suggesting that it’s not necessarily a decentralized coin.
One of the big questions regarding Ripple at press time is whether it sells XRP to fund its operations. If this is going on, that makes it a security, and it should have registered with the Securities and Exchange Commission (SEC). Granted the court sees things through the plaintiff’s eyes, Ripple could face action from regulators in the United States.
Rebecca Rettig – a partner at Fisher Broyles law firm – believes that even if the plaintiff is successful, the lawsuit isn’t likely to shine any light on Ripple’s status. She also believes that the lawsuit is likely to last a very long time, which means people may not garner the answers they’re seeking right away.
No one’s finding out whether XRP is a security anytime soon, if ever, at least through this proceeding.
One of the problems is that Ripple keeps trying to sideswipe the issues at hand. It says that Sostack filed too late and thus the statute of repose should be taking effect. That’s why the company is looking to have the suit dismissed.
Rettig says that this argument has been used in the past, and for the most part, it’s been successful with other cases. She states:
The statute of repose argument… was used successfully a number of times in cases bringing Securities Act claims related to mortgage-backed securities six or seven years ago, which provides precedent the defendants could rely on.
How the Company Could Come Out Ahead
She also suggests that Ripple has an advantage in that it has data and evidence from all angles:
When the plaintiff first filed the amended complaint, there was a lot of discussion about how novel and interesting it was that the plaintiff cited extensively to websites, social media and the like. It was an interesting tactic and it made for a robust [complaint]… Usually, defendants can only use the facts alleged in the complaint itself or the facts incorporated by reference in a complaint in defending against claims on a motion to dismiss. Here, however, defendants were able to use all the facts in the documents, websites and social media posts to which the complain cities in rebutting plaintiff’s claims.