Ripple makes another attempt to have class-action lawsuit dismissed

Ripple has filed yet another attempt to have the class-action lawsuit against it dismissed. This time, it claims that even if XRP were a security, the aggrieved investors brought their case too late and thus, the court should dismiss it. The latest effort by Ripple also sought to distance the company from the sale of the XRP tokens, claiming that it only sold less than 0.1% of the total XRP in supply.

“Plaintiff’s Complaint is self-defeating: his own allegations as to when XRP was first offered for sale and how he purchased XRP require dismissal of his claims,” the filing claims. Filed with the U.S. District Court for the Northern District of California, it claims that the investor bought the XRP tokens years after Ripple stopped selling them.

According to the filing, Ripple sold XRP tokens from 2013-2015. By 2015, over 30 billion XRP were already in circulation. The investor, led by court-appointed lead plaintiff Bradley Sostack, bought the XRP in January 2018 from a third party. At the time, Ripple’s sales accounted for 0.095% of the total volume of XRP sold on exchanges, the filing claims.

Interestingly, Ripple avoided disputing the accusation that XRP is a security. Part of the filing states:

“Plaintiff contends that XRP is a security under the Howey test. XRP is not a security, but that is irrelevant for purposes of this motion. Even if XRP were a security, Plaintiff’s claims still fail as a matter of law.”

Instead, the San Francisco-based company attacked the lawsuit, referring to the ‘first-offered’ rule. This rule “strictly forbids claims brought more than three years after the security was bona fide offered to the public.”

This rule could enable Ripple to win the court battle, with other companies having used this rule in the past and emerged victorious. Rebecca Retig, a partner at Atlanta-based law firm FisherBroyles, noted how well Ripple’s lawyers have avoided the ‘is XRP a security’ debate.

Speaking to CoinDesk, she stated, “The defense lawyers have done a good job so far. They’ve shown some good tactical skills, they could win but even if they do there are a lot of other things that could happen.”

She further revealed that the statute of repose (first-offered rule) has been used successfully in the past.

“The statute of repose argument … was used successfully a number of times in cases bringing Securities Act claims relating to mortgage-backed securities six or seven years ago, which provides precedent the defendants could rely on.”