Jed McCaleb and Chris Larsen, Founders of Ripple Labs, the company that introduced Ripple (XRP-USD) cryptocurrency, has been slapped with a lawsuit for the third time in less than two months. As per the report, the plaintiff, a private XRP investor has alleged that the founders broke both federal and state securities laws to make money and that XRP is just a never-ending ICO.
The plaintiff has accused the defendants, founders of Ripple Labs, including the CEO of Ripple, Brad Garlinghouse of misleading the public by selling unregistered XRP tokens under the corporate code of California. The plaintiffs are now asking for a refund for damages.
Operating as a non-stop ICO
All the three lawsuits filed against Ripple Labs state that the non-mineable supply model and centralized status of Ripple’s coin has made it possible for the company to keep on operating as a non-stop ICO. It has contributed to around $100 million worth of token to the company’s Fourth Quarter Earnings in 2017. Cryptocurrency traders are still not clear whether XRP is a security or not. According to the co-founder of Multicoin, Kyle Samani, investors should not trade XRP as it is certainly a security.
However, the claim has been denied by the Ripple founder, Garlinghouse. The head of corporate communication of Ripple, Tom Channick said, “Whether or not XRP is a security is for the SEC to decide. We continue to believe XRP should not be classified as a security.”
Ripple Labs accused of employing tactics to drive demand for XRP
In his detailed filing, the plaintiff has said that all the signs indicate that XRP is a security and hence Ripple Labs must disclose certain details to its investors such as potential risks and other information. The lawsuit says that the founders of Ripple Labs received 20 billion tokens whereas the company itself received 80 billion and they sold these tokens quietly to the general public and earned massive profits.
According to the lawsuit, the defendants used various measures to artificially increase both the demand and the price of XRP. Ripple Labs placed 55 billion XRP in an escrow account secured cryptographically to ensure that the supply of coin is maintained. Ripple could have flooded the market, however, with this action, the token price of XRP went up by approximately 1000%.