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Ripple CEO accused of fraud in class action lawsuit

  • Brad Garlinghouse, Ripple’s CEO, is accused of fraud in the lawsuit against the company by ICO over the XRP token.
  • The plaintiffs accuse Garlinghouse of making false statements to mislead XRP investors.

In a new development in the lawsuit against Ripple, company CEO Brad Garlinghouse is accused of fraud. The accusation is part of an amendment to an indictment filed by plaintiffs on March 25 of this year. The original indictment received a response from the court at the end of February.

At that time, the judge ruled that Ripple’s CEO had no individual legal responsibility in the lawsuit. In addition, the court also dismissed arguments that there were misleading statements by the defendants regarding the illegal sale of XRP in the state of California. However, the federal court for the Northern District of California granted the plaintiffs a period of 28 days to make claims. The plaintiffs responded with the above-mentioned amendment.

The lawsuit in question was filed in May 2018 by retail investors who claim to have made an investment in XRP. The plaintiffs claim that they lost money from the illegal sale of the token. Therefore, they seek to have XRP classified as a security for appeal under U.S. law. The goal of the lawsuit is also to claim monetary compensation for their alleged losses.

Accusations against Ripple’s CEO

In accordance with the amendment, the plaintiffs submitted as evidence for their claims statements that Garlinghouse made publicly. In December 2017, according to the lawsuit:

Ripple’s CEO, Brad Garlinghouse, has also been a vocal advocate for investing in XRP. (…) when asked if he is personally invested in XRP, the CEO stated “I’m long XRP, I’m very, very long XRP as a percentage of my personal balance sheet.”

The lawsuit continues and establishes that Garlinghouse was selling XRP for fiat money, contrary to its claims. The lawsuit claims:

Defendants had exclusive or superior knowledge of material information regarding Garlinghouse’s XRP sales, but omitted it from their representations to investors (…). Accordingly, Garlinghouse’s statement was a misrepresentation and omission of material fact to investors.

The plaintiffs argue that Ripple’s native token is falsely promoted as a utility token. Instead, according to the plaintiffs, the token is only a means for Ripple to make a profit, with no practical use for it. According to the document:

The money raised through the sales of XRP substantially exceeds the amount of money needed to establish a functional network or digital asset. There is also little apparent correlation between the purchase price of XRP and the market price of any goods or services that can be acquired in exchange for XRP, which to date has not been functionally adopted nor used in any meaningful way.

Ripple said that the demand is a threat to XRP and the whole market. It remains to be seen what the court’s mandate will be in the face of these new arguments and whether Ripple’s token will be classified as a security. At the time of publication, Ripple’s CEO has not yet issued a statement on this new development.

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About Author

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Reynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

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