Investor litigation is directed at Ripple, will the XRP building be dumped?

Abstract: XRP investors have proved that Ripple illegally sells unregistered securities based on the relevant content of the Digital Asset Investment Contract Analysis Framework issued by the US Securities and Exchange Commission in April this year.

Today, XRP investors have again filed a new lawsuit against Ripple. It is understood that this is the fourth time that XRP investors have filed a lawsuit against Ripple. As early as 2018, Ripple has been subject to class action by XRP investors three times in succession.

The content of the lawsuit is an important supplement to the May 2018 lawsuit, when XRP investors claimed that Ripple violated state and federal securities laws and sold unregistered XRP securities to retail investors to raise hundreds of millions of dollars. Investors believe that there is a direct correlation between Ripple and XRP.

According to the content of this lawsuit, XRP investors proved that Ripple illegally sold unregistered securities based on the relevant content of the Digital Asset Investment Contract Analysis Framework issued by the US Securities and Exchange Commission in April this year. XRP investors said that although the framework is only a non-legal framework, the court should use the Howey test results mentioned in the framework as an important reference.

At the same time, the supplementary lawsuit also proposed that Ripple also violates California's false advertising and unfair competition law. In response, the investor requested the court to support the lawsuit as a collective act and determined that XRP is a security and Ripple is not registered for sale. XRP violates applicable laws and awards damages to plaintiffs and other members.

Supplementary lawsuit

First, in the supplement, XRP investors re-emphasize that XRP is a kind of securities, and specifically pointed out that Ripple has violated the Federal Securities Act and the California Companies Securities Act, and XRP investors said: Ripple will not be registered XRP Securities are sold to retail investors to raise hundreds of millions of dollars in illegal activities.

Later, XRP investors mentioned the “Digital Asset Investment Contract Analysis Framework” issued by the US Securities and Exchange Commission (SEC) in 2019, which provides guidance for assessing whether crypto token issuance is a federally mandated security. This is also one of the most important additions to this lawsuit.

In the "SEC Framework", the Howey test was proposed for digital assets. In this regard, XRP investors believe that the Howey test results can be used as an important reference for judging whether XRP is a security.

The criteria for the Howey test:

(1) This is a money investment; (the court and the SEC's definition of “money” is not limited to legal currency, and all objects that are widely considered to contain embedded value are considered to be money. Especially in The DAO token case Among them, ETH and other related crypto tokens are also considered money in Howey Test.)

(2) This investment is expected to generate profits in the future;

(3) These profits come from the efforts of the issuer or a third party;

(4) This investment is for a specific enterprise (common enterprise, which can be extended to be interpreted as a project);

Corresponding to this test criteria, XRP investors said that XRP buyers need to provide money consideration (in legal tender, including US dollars or other cryptocurrencies) in exchange for XRP. At the same time, XRP buyers invested in a targeted enterprise, XRP investors have reasonable expectations for XRP's future profits, and Ripple itself often emphasizes this profit motive, and has taken measures to achieve this goal. In this regard, XRP investors believe that the XRP tokens offered and sold by Ripple have all the traditional features of securities that apply to the framework content.

In addition, XRP investors compared XRP with cryptocurrencies such as Bitcoin and Ethereum, indicating that cryptocurrencies such as Bitcoin and Ethereum were mined by people who verified transactions on the network, while the existing 1000 At the beginning of its establishment in 2013, Yirui Bococo was created out of thin air before any release , except for being a speculative investment, without any function.

Violation of California's False Advertising and Unfair Competition Law

XRP investors claim that the value of XRP has substantially exceeded the value of revenue or cash flow from all other sources of Ripple. It believes that Ripple's main value proposition is that it owns and sells XRP tokens. In order to increase the demand for XRP and thus increase the profit that can be obtained by selling XRP, Ripple describes XRP as a good investment and conveys optimistic price forecasts. And confuse Ripple's corporate business with XRP.

At the same time, Ripple paid a large amount of the listing fee in order to arrange the XRP for the crypto-exchange listing. Ripple also deposited a large portion of the Ripple held by it in the escrow account and made a plan to determine when the Ripple should be sold and what The number of Ripple coins sold is to limit the sales pressure in the market to support the price of Ripple.

In addition to this, Ripple's unfair competition behavior, in the lawsuit, XRP investors carried out further examples, said that in 2014, Ripple publicly stated on its website, "We will take our expectations will lead to stability Or strengthen the distribution strategy for exchange rates of other currencies.” (Ripple later deleted the page as if it erased history.)

Not only that, XRP investors also claimed that Ripple had proposed to pay the listing fee to allow the famous American cryptocurrency exchange Coinbase and Gemini Trust to go public. According to reports, at the time, an Ripple executive asked if paying $1 million in cash would convince Gemini to list XRP in the third quarter of 2017. Although both Gemini and Coinbase refused to adopt these recommendations, there are rumors that by the end of 2017 and early 2018, XRP will be added to Coinbase, which will drive up its price. And Ripple is the source of these rumors.

In this regard, XRP investors said that the substantial increase in XRP is based on these false advertising and unfair competition laws, and since the beginning of 2018, the price of XRP has fallen sharply, causing major financial losses for its investors (including the main plaintiffs).

Is XRP a security?

At present, the repeated claims against XRP investors can be successful. Whether XRP is a security or not is still subject to clear definition by relevant institutions.

It is understood that before the US Securities and Exchange Commission (SEC) Chairman Jay Clayton said in an interview, in addition to digital currency like Bitcoin, all other cryptocurrencies are securities. And reiterated in the open forum: Most of the securities I saw in the ICO field. This includes XRP.

But in the face of this problem, Ripple CEO Brad Garlinghouse has repeatedly said in public that XRP is not a security. He said, "XRP is not a security. There are three reasons: If Ripple shuts down tomorrow, the XRP ledger will continue; XRP is an open source, distributed technology; if you buy XRP, you are not buying Ripple's stock. Buying XRP won't give you Ripple ownership."

It is worth noting that some foreign media said that with reference to Kik Interactive's response to the Securities and Exchange Commission, from August 5th, Ripple must respond to the above questions within 45 days (before September 19).

This also means that Ripple is not much left. If XRP investors win the case, then this is a major global blow to XRP. At that time, Ripple will not only face huge fines, but also face currency. Dismounted.

Up to now, according to Coinmarketcap data, XRP ranks third in the cryptocurrency market capitalization list, second only to Bitcoin and Ethereum. The total market value reached US$12.6 billion, accounting for 4.4% of the total market value of the entire cryptocurrency market. And this turmoil will bring turbulence to the encryption market, whether it can survive this robbery, it depends on the attitude of supervision and how Ripple will choose how to deal with it.

Original: Cao Xiaoya Editor: Sharing Finance Neo