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18 August 2022
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Ripple: Plaintiffs respond to request for dismissal of securities claim

  • plaintiffs have responded to Ripple’s motion to dismiss the fraud and security claims for lack of evidence.
  • A hearing on the decision to dismiss the charges will be held on August 26 this year.

The plaintiffs in the case against Ripple Labs have responded to Ripple‘s motion to dismiss fraud charges. The motion was filed by Ripple in early June this year. The company argued in a document before the Northern District Court of California that the plaintiffs’ evidence was insufficient. Ripple has been facing this suit since November 2018, making it one of the company’s oldest litigation. Bradley Sostack is the primary plaintiff suing Ripple.

The plaintiffs’ response to Ripple’s application

In the document referred to, Ripple’s legal representatives stated that the plaintiffs had no evidence linking Ripple, its CEO or employees to making statements in support of the charges. The document presented by the opposing party rejects the above argument. The plaintiffs’ contention that the document submitted by their counterparty is unspecified, as the document states:

The defendants fail to establish that the factual claims contained in the document cannot reasonably be challenged. In fact, the defendants do not even specify which factual assertions in the document they are asking the Court to consider.

Sostack’s lawyers deny that the letter from the U.S. Consumer Financial Protection Bureau (CFPB) is relevant to the case. Ripple cited this document in its most recent motion as evidence that XRP is a utility token, which in fact cannot be classified as a security because it is a counterparty to SWIFT’s existing payment system. But according to the plaintiffs it cannot be used as a test of truth in either party’s argument. In that regard, the plaintiffs asked the court to dismiss any argument based on the CFPB’s statements.

Indeed, Defendants do not even specify which factual assertions with the document they ask the Court to take judicial notice of. To the extent Defendants are attempting to use the document for the notion that the XRP tokens had utility during the relevant time period, this fact is hotly contested and is not subject to the judicial notice. For these reasons, Defendants’ request should be denied.

As reported by CNF, Ripple Labs is charged with making an unregistered sale of securities in violation of the Securities Act and in violation of California Companies Code Sections 25110 and 25503 and violating Section 15 of the Securities Act as a controlling party.  In addition, Ripple is charged with violating section 25401 and sections 25110 and 25504 of the California Corporations Code.

Ripple and its executives, specifically its CEO, Brad Garlinghouse, are accused of misleading advertising. The hearing to determine whether the charges are dismissed will be held on August 26 of this year.

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