Ripple is facing a new civil securities lawsuit following Judge Phyllis Hamilton’s approval and dismissal of four allegations regarding the failure to register XRP as a security.
The fate of Ripple’s legal battle hangs in the balance as Judge Hamilton of the U.S. District Court for the Northern District of California gives the green light to a fresh civil securities lawsuit against the blockchain company. The lawsuit revolves around an alleged misleading statement made by CEO Brad Garlinghouse.
The order, issued on June 20, suggests that a jury will determine whether Garlinghouse’s 2017 statement deceived investors into investing in XRP or not.
In an investigation into the exact comments made during a seven-year-old interview with Business News Network, CNF discovered a transcript excerpt in which Garlinghouse stated, “I’m long XRP, I’m very, very long XRP as a percentage of my personal balance sheet… [I am] not long on some of the other [digital] assets, because it is not clear to me what’s the real utility, what problem are they really solving… if you’re solving a real problem, if it’s a scaled problem, then I think you have a huge opportunity to continue to grow that. We have been really fortunate obviously, I remain very, very, very long XRP, there is an expression in the industry HODL, instead of hold, it’s HODL… I’m on the HODL side.”
To defend against this “misleading statement” allegation, Ripple argued that XRP does not qualify as a security under the Howey test, and therefore the claim should be dismissed. The Ripple legal team also cited a previous ruling by Judge Analisa Torres in July 2023 in a case involving the SEC and the blockchain company to support their argument.
However, Judge Hamilton disagreed, stating that XRP could be considered a security when sold to non-institutional investors. She argued that Ripple’s efforts to promote the asset through its “XRP in cross-border payments” and other use cases could lead investors to expect profit.
In response to the dismissal of four allegations regarding the failure to register XRP as a security, Ripple’s chief legal officer, Stu Alderoty, expressed satisfaction with the court’s decision to dismiss all class action claims. He believes that the one state law claim going to trial will be adequately addressed.
The plaintiff, who did not directly purchase from Ripple and cannot confirm if they heard the statement before trading, allegedly lost a few hundred dollars.
As of now, XRP is trading at $0.48, experiencing a 1% decline in the last 24 hours and a 7% decline in the last seven days.