Ripple will have to defend itself in a long-running class-action lawsuit over claims it violated securities laws in selling unregistered securities. In the lawsuit, XRP buyers allege that they lost a substantial amount of money on relying on fraudulent promotional statements issued by Ripple that encouraged them to sell their XRP Tokens.
The class-action lawsuit takes Ripple into a task for selling unregistered securities in total disregard of security laws in the US. A US District Court has since ruled that the class-action lawsuit can proceed, be it with some caveats.
The class-action lawsuit will now cover claims filed under the federal law while sidelining all claims filed under the California state law. While the ruling relieves Ripple of some pressure, affected XRP investors can still file new claims under California laws within the next 28 days. The court, in its verdict, dismissed Ripple’s argument that the lawsuit was not timely and thus should be thrown out.
The class-action lawsuit was filed five years after XRP hit the markets. Ripple, in its arguments, insists that if the lawsuit is allowed to proceed, it could destroy the XRP market share in the global cryptocurrency space.
The lawsuit threatens Ripple’s continued operations in the multi-billion industry. For instance, there are concerns that regulators could end up concluding that the cryptocurrency is an unregistered security and so should not trade on the capital markets.
To date, the US Securities and Exchange Commission has yet to take a stand on what cryptocurrencies are, let alone XRP. The Ripple class-action lawsuit is in its second year, a number of complaints having been consolidated and moved from state courts into the federal court.