The class action against Ripple Labs for issuing XRP as an unregistered security goes to the next round. The trial, pending since November 2018 and led by lead plaintiff Bradley Sostack, is the oldest of all trials against Ripple Labs. During the trial, Ripple faces a total of seven claims and charges.
In detail, Ripple Labs is accused of having made an unregistered sale of securities in violation of the Securities Act and in violation of articles 25110 and 25503 of the California Corporations Code and of having violated article 15 of the Securities Act as a party controlling. In addition, Ripple is charged with violating section 25401 and sections 25110 and 25504 of the California Corporations Code. Finally, Ripple is also accused of false advertising and unfair competition.
According to a new court document released on June 8, Ripple Labs has filed a motion to dismiss three of the seven charges alleging Ripple's fraud. In the motion, lawyers for the company say that the main complainant Sostack Bradley failed to demonstrate how employees and CEO of Ripple Brad Garlinghouse, have made fraudulent statements.
In the United States, the term "fraud" is defined such that the applicant must prove two things. First, the fraud must have been actually committed and second, the defendant must have been aware of the deception. According to Ripple, Sostack's amended complaint (FAC), filed in March, does not meet the requirements:
The claimant's FAC identifies the allegations that purport to contain false statements, "said the record. But these "alleged false statements" cannot be considered fraudulent and "the claimant does not explain (and cannot) explain how and why these statements are false.
In particular, Ripple's lawyers also respond to the allegation in the amended complaint that Ripple and Garlinghouse were promoting XRP , while the XRP Ledger shows that Garlinghouse sold all of the XRP it received from Ripple in the days following its receipt. Ripple denies, however, that this is a deception of investors. Just because Garlinghouse sold its XRP doesn't mean it's not yet optimistic about the token's prospects, the motion says.
In general, the plaintiff has twice failed to prove the allegations of fraud, and a third time will not be admitted, which is why Ripple's lawyers ask that the claims be dismissed:
The plaintiff only alleges that "the defendants, individually or together, were aware of the falsity or misleading nature of a statement or omission made in connection with the offers or sales of XRP ". According to the defendants, this is not appropriate and the plaintiff's claims should be prejudiced accordingly. […]
The defendants assert that "the plaintiff has twice failed to plead allegations sufficient to substantiate the allegations of fraud. A third attempt should not be allowed and these requests should be dismissed with prejudice. This would prohibit the plaintiff from re-accusing the company or Garlinghouse of similar allegations
Interestingly, Ripple also submitted four documents in support of his case, one of which is the most recent letter from the United States Bureau of Financial Consumer Protection (CFPB). As reported by CNF, the US Bureau of Consumer Financial Protection has identified Ripple and XRP as potential game changers that can fundamentally transform the money transfer market.
