The latest lawsuit, which was filed on Friday at the Northern California District Court claims that Ripple released “a litany of false and misleading statements regarding XRP” in order to increase demand and raise more than $1 billion from the public.
This was filed by Attorney Pavel Pogodin through his company Consensus Law, which is based in Isla Verde, Puerto Rico. The plaintiff, an entity with next to no online presence, is listed as ‘Bitcoin Manipulation Abatement LLC.’ Public records show that the company was created in March 2019 with Pogodin listed as the “resident agent”.
Coincidentally, Bitcoin Manipulation Abatement was also the plaintiff in another class-action lawsuit that was filed last November against FTX, a crypto-derivatives exchange. This suit called for $150 million in exchange for exemplary and punitive damages; however, it was dismissed soon after.
Multiple investors in California have filed class-action lawsuits against Ripple in the past, claiming that the company has failed to register XRP as a security with the SEC and notify the public with the appropriate company documents and disclosures. This recent lawsuit builds on several of these claims, which were made in the previous lawsuits against Ripple.
The complaint explains that XRP is a security because purchasers were led to believe that it would be a long-term growth asset they could expect a profit from. In addition, the plaintiff’s law firm also states that XRP is not a currency because it cannot be used to purchase products or services.
XRP is different from other cryptocurrencies, such as Bitcoin and Ethereum, because it is created in a centralised manner. The latter are mined by a decentralized network of nodes, while all one hundred billion XRP in existence were created without any notable costs by Ripple in 2013.
During this time, 80% of the total XRP supply was retained by the organization while 20% went to the founders. Ripple has contended that the 80 billion XRP was placed into an escrow, which it cannot touch; the only access to it is when a portion is released each month, and when Ripple previously sold XRP on cryptocurrency exchanges.
Furthermore, the complaint argues that Ripple’s only contribution as a company depends on the promotion of XRP, even as XRP is “entirely or essentially pre-functional and purchased by investors in anticipation of profit based on the efforts of Ripple.”
This is not Ripple’s first time dealing with similar allegations. In March 2019, Ripple’s Chief Technology Officer David Schwarch previously presented arguments for why XRP is not considered security at an annual SXSW festival in Austin, Texas.
The USEC has yet to take a position as to whether or not XRP should be considered a security.