May 5, 2018 by Kyle

An investor in Ripple claims that he lost serious money buying and selling XRP, so he has filed a class action lawsuit against the distributed ledger startup, claiming that the company violated state and federal securities laws.

According to CoinDesk, Ryan Coffey, who is represented by San Diego attorney James Taylor-Copeland, filed a suit in the San Francisco County Superior Court this Thursday.

Mr. Coffey is looking forward to obtaining damages “on behalf of all investors who purchased Ripple tokens (“XRP”) issued and sold by Defendants.” In the suit he filed, he names Ripple, XRP II (the company’s registered and licensed MSB), as well as CEO Brad Garlinghouse and 10 unnamed parties.

This doesn’t come as a surprise, from a specific point of view!

Over the past few weeks, both Ripple Labs and Brad Garlinghouse have come under scrutiny, considering the degree of association they have with XRP. The cryptocurrency surged to a huge market capitalization in January, of over $140 billion, but eventually fell below $35 billion.

On the other side, Ripple’s director of regulatory relations, Ryan Zagone, told a UK parliamentary committee that “there is not a direct connection between Ripple, the company and XRP.”

However, it is pretty obvious for a lot of observers that a connection between the company and the coin exists, according to a complaint issued this Thursday:

“The development of the XRP Ledger, and the profits that investors expected to derive therefrom, were, and are, based entirely on the technical, managerial, and entrepreneurial efforts of Defendants and other third parties employed by Defendants.”

The law is very clear regarding securities

This comes in contrast with a U.S. federal law which requires companies selling securities to register with the SEC (Securities and Exchange Commission). Specifically, if an instrument implies an investment and eventually carries a reasonable expectation of profits that depends on the actions of a group of people, then it can be called a security. Ryan Coffey’s complaint says that XRP checks all of these conditions.

The lawsuit against Ripple is definitely a case to watch, considering that the coin’s status as a security is still being debated.