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Lawsuit: Ripple replies to the plaintiff’s fraud allegations.

Ripple has replied once again to the plaintiff’s fraud allegations in the Zakinov v. Ripple Labs case. Ripple claims that the plaintiff has had two bites at the apple and takes a third, yet he still fails to show why the statements on which his Fraud Claims depend are false.



The lawsuit



Zakinov v. Ripple Labs, Inc. ( 4:18-cv-06753 ) was filed in November 2018 in the District Court for the Northern District of California. Since then, it was related to various other cases (Oconer v. Ripple Labs, Greenwald v. Ripple Labs, and Bitcoin Manipulation v. Ripple Labs ). Bradley Sostack was named as lead plaintiff in June 2019.



The plaintiffs initially filed for seven claims for relief: 1. Unregistered Offer and Sale of Securities in Violation of Sections 5 and 12(a)(1) of the Securities Act. 2. Violation of Section 15 of the Securities Act. 3. Unregistered Offer and Sale of Securities in Violation of California Corporations Code Section 25110 and 25503. 4. Violation of Section 25401 of the California Corporations Code. 5. Violation of Sections 25110 and 25504 of the California Corporations Code. 6. False Advertising in Violation of Business and Professions Code Section 17500, et seq. 7. Unfair Competition in Violation of Business and Professions Code Section 17200, et seq.



Ripple filed for dismissal and in February 2020, the honorable judge Phyllis J Hamilton granted and denied in part the motion to dismiss. Specifically, the charges for misleading advertisements were dismissed (causes 6 and 7) along with the charges against Ripple and Brad Garlinghouse for control person liability in connection with the defendants’ primary violation of § 25110 (cause 4). Causes 1, 2, 3, and 5 that claimed Ripple sold unregistered securities and that misleading statements were made remained.



The court gave the plaintiff 28 days from the date of the order to file an amended consolidated complaint accounting for the deficiencies in the claims dismissed without prejudice (claim 4). This was the plaintiff’s first failed attempt to prove that Ripple and Brad Garlinghouse had committed fraud.



Fraud allegations



The plaintiff filed an amended complaint containing various statements made by Ripple and Brad Garlinghouse (supposedly proving fraud was committed) in March 2020. Ripple once again argued for the fraud allegations to be dismissed in June 2020 by claiming that the plaintiff failed to prove how and why those statements were false (plaintiff’s failed attempt number two). Sostack replied a month later by providing more than a dozen statements, particularly pleading who made them when they were made, and where.



Ripple now claims that the plaintiff has failed to prove how the statements mentioned are false and rely on unsupported leaps of logic.



Specifically:



Plaintiff’s claim : “XRP has no such utility” (to settle cross-border transactions back in 2017). Ripple’s reply : A product’s usefulness or utility does not depend on its widespread adoption in the moment. Plaintiff has therefore not shown why statements about XRP’s utility are false.



Plaintiff’s claim : Mr. Garlinghouse sold XRP in 2017 and some of these sales occurred shortly after he received XRP. This proves that “Mr. Garlinghouse was not actually long on or holding XRP” at the end of 2017. Ripple’s reply : A snapshot of Mr. Garlinghouse’s alleged sales is not inconsistent with him continuing to hold XRP. Thus, the Plaintiff has not established why Mr. Garlinghouse’s statements about his XRP holdings were false.



Plaintiff’s claim : Ripple sold $91 million of XRP in the final quarter of 2017 and $167.7 million XRP in the first quarter of 2018. Ripple sold “over a hundred million dollars’ worth of XRP” in the final month of 2017. Ripple’s reply : The former all but precludes the latter. Because the Plaintiff has not explained why statements about Ripple’s XRP sales are false, these supposed misstatements cannot support Plaintiff’s Fraud Claims.



Plaintiff’s claim : Ripple “falsely conflate[d]” the adoption of XRP with the company’s enterprise business solutions, when, allegedly, “few, if any, of [Ripple’s enterprise] customers were actually using XRP.” Ripple’s reply : The statements the Plaintiff cites are silent as to XRP’s adoption and often do not even mention XRP at all. Thus, the Plaintiff has not established how these statements “conflate” XRP and Ripple’s enterprise products, nor why the statements are false. Therefore, these purported misstatements also cannot support Plaintiff’s Fraud Claims.



According to Ripple, the Plaintiff failed to offer the factual allegations needed to show that Ripple’s and Mr. Garlinghouse’s statements were false when made. Instead, the Plaintiff invites the Court to ignore the requirements of Rule 9(b) (Plaintiff must plead not only that a statement is false but also “what is false” about the statement and “why it is false.”) and make unsupported leaps of logic based on facts that Plaintiff never alleged in the FAC. This is why Ripple asks for these fraud allegations to be dismissed with prejudice.



You can read Ripple’s reply below, compliments of Mr. Hector Acosta Carrillo .


106-main








New York case coming to California



A week ago, on July 24, Simmons v. Ripple Labs Inc. ( 1:20-cv-02236 ), the second securities lawsuit filed against Ripple in New York, was moved to California. It is expected that the case will probably get consolidated with the Zakinon case, like three other cases in the past.



California working group recommendations



While the court and both sides are focused on these fraud allegations, a working group formed by the Secretary of the Government Operations Agency (CalGovOps), the California government agency responsible for administering state operations including procurement, real estate, information technology, and human resources, has suggested that digital assets should be regulated.



Τhe California Blockchain Working Group suggested that a definition and separate regulation of digital assets based on their function could bring regulatory clarity to blockchain and digital assets. On July 1, 2020, the group issued its  report , “Blockchain in California: A Roadmap”, addressed to the members of the California Legislature.



The next hearing for the motion to dismiss the fraud allegations is set for August 26.
The post Lawsuit: Ripple replies to the plaintiff’s fraud allegations. appeared first on XRPArcade .

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