Ripple Faces Fresh Lawsuit in California After SEC Victory

The legal battle between Ripple Labs and the SEC may have just taken a surprising, perhaps “unforeseen” twist, with a recent California Jury filing and court ruling reigniting the dispute. The California Judge alleges that Ripple, through its CEO Brad Garlinghouse, misled investors about XRP, a digital asset developed by Ripple.

The case took a significant turn when U.S. District Court Judge Phyllis Hamilton dismissed four of the five claims in the class action lawsuit against Ripple. These dismissed claims were termed as “failure to register claims.” However, the claim regarding Garlinghouse’s alleged misleading statements will proceed to trial.

YouTube’s Ripple vs. SEC lawsuit update.

Key Details and Allegations

Garlinghouse had professed to be “very, very long” on XRP, a term used in the trading world to indicate a strong belief that a particular asset’s price will rise. However, the lawsuit alleges that this statement was false as Garlinghouse was simultaneously selling “millions of XRP on various cryptocurrency exchanges” throughout 2017. According to the plaintiff, this constitutes a violation of California’s securities laws.

The trial will focus on whether Garlinghouse’s statements during the 2017 interview were misleading and whether they violated state securities laws. 

Ripple’s Chief Legal Officer, Stu Alderoty, expressed satisfaction with the dismissal of the class action claims but acknowledged that the remaining claim would be subject to trial.

You’ll recall that this comes after their partial victory in a case against the U.S. Securities and Exchange Commission (SEC), where a U.S. court ruled that selling XRP on exchanges did not constitute an investment contract.

Interestingly, Judge Hamilton’s ruling diverged from a similar case in the Southern District of New York (SDNY), where Judge Analisa Torres ruled that XRP did not meet all the prongs of the Howey Test when sold directly to retail participants on crypto exchanges.

Judge Torres’ ruling had been seen as a step toward regulatory clarity for the crypto industry. However, Judge Hamilton’s decision in California indicates that the legal landscape remains complex and nuanced.

Judge Hamilton’s ruling has stirred the pot in the crypto community as it diverges from the earlier celebrated ruling by Judge Torres. This divergence highlights the ongoing debate and uncertainty surrounding the regulatory status of cryptocurrencies.

Analyst Pantoja summarizes next year’s XRP’s price trajectory in this tweet.

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