Court documents were signed last week and this has revealed that both Ripple Labs and their CEO have been served with a third security violation. This is one of many over the last couple of months. The latest suits dated back to June 27th and an XRP investor has stated that Ripple and their CEO have conflated the CRP token and they have done this with their own Ripple technology. They have even illegally profited from the price increase over the entire time. The nature of the XRP means that it has a mining-free distribution model and that all three lawsuits are regarding this. They have a continued ICO period and this ultimately means that Ripple Labs have been funding themselves by selling nearly $100 million worth of their very own currency. This is in the last quarter of 2017. The XRP token itself has not been classified as a security yet and all three suits have shed some light on the consistent level of self-funding. The Recorder have even reported that the sale of XRP in general have dwarfed any sources of the revenue at Ripple. In the year 1946, the US Supreme court have established the Howey test and this is a framework that helps to determine whether nor not an asset should ever be deemed as being a security. This is especially the case when you look at the investment contract. The Howey test runs in this way. A transaction happens to be a security if there is an investment of assets. There also has to be an expectation of profits from that very investment as well. That investment tends to be a common enterprise and any profits that stem from this will be due to the fact that a promotor is involved or even a third party. It is a proven fact that the entire history of XRP has been one long illegal movement.
It has been operating under the SEC’s nose and all three of these lawsuits could easily end up being successful. This could also go on to set a critical precedent for everything that is to come. Ripple Labs and their CEO are currently being held liable for trading millions of dollars illegally. The lawsuit was filed by lawyers and some people have even come out to say that Ripple have used Twitter to try and drive up the price of their own currency. The court documents have pointed to Ripple, stating that they have placed 55 billion XRP tokens on Escrow. This was seen as a means of reassuring investors that a lot of control for the circulation should not be abused by any type of large sell-offs and that they were in fact selling off tokens on the quiet. This is not acceptable at all. Making a move like this on a public basis could have a serious effect on the market and it could even mean that over 55 billion tokens are removed from circulation. This is big news to say the least. The complaint even notes that the price of XRP rose by over 1000% during the quarter and that this could have a huge impact on Escrow. Ripple Labs are not taking this lightly. Mary White is the former securities manager and she has been very spearheaded in terms of her defence.
When you look at the bigger picture, it isn’t hard to see the possibility of this lawsuit being successful, but this could end up being the least of Ripple’s own concerns. Investors may be entitled to refunds, but that isn’t good news for the platform in general.