September 22, 2021

Volume XI, Number 265

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A Security By Any Other Name Would Smell As Sweet

“A rose by any other name would smell as sweet.” Like the Shakespearean rose, Ripple Labs faces another claim that its digital asset XRP is a security in a new federal lawsuit in California. The suit filed by Bitcoin Manipulation Abatement LLC, claims Ripple’s XRP is an illegally offered security. The plaintiff alleges that Ripple violated federal and California state law by offering and selling unregistered securities without a registration or an exemption from registration and that Ripple engaged in false advertising and unfair competition. Ripple is yet another cautionary tale of an issuer of a digital asset that was used to raise capital from purchasers in a manner that made it look like a security.

The plaintiff claims Ripple raised more than a billion dollars through sales of XRP—an unregistered security—to retail investors in violation of the registration provisions of federal and California securities laws with the primary purpose to enrich Ripple’s executives, directors, founders, and affiliates. Additionally, the plaintiff alleges that in order to drive demand for and increase profits from the sale of XRP, Ripple Defendants made false and misleading statements regarding XRP. The plaintiff claims XRP is a security because the purchasers thereof were conditioned to expect and in fact expected to profit from Ripple ‘s success. Sale of XRP by Ripple was an offer and sale of securities because Ripple marketed XRP in way to lead investors to believe XRP would increase in value and become worth more than the fiat and/or virtual currencies invested. The plaintiff noted Ripple explicitly referred to purchasers of XRP as “investors” and repeatedly stressed their intention to keep the value of XRP stable and increasing, and that XRP would be a long-term growth asset.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 132
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About this Author

Richard Levin Polsinelli Fintech Attorney
Shareholder

Richard Levin is the Chair of Polsinelli’s Chambers rated FinTech and Regulation Practice.  He brings his experience as a senior legal and compliance officer on Wall Street and in London to bear in advising clients on corporate, securities and regulatory issues. A problem-solver by nature, his practice focuses on helping financial services and technology (FinTech) clients identify and address regulatory issues as they build their businesses.

The FinTech sector is...

303.583.8261
Paul Roshka, Polsinelli, financial securities lawyer
Shareholder

Known for his thorough preparation and persistence, Paul Roshka has a national practice representing companies, their directors, officers, and employees during investigations and enforcement/disciplinary proceedings involving potential violations of the federal and state securities laws, and other financial regulatory statutes and rules. He has handled matters initiated by almost every SEC Regional Office and FINRA District Office, and their Home Offices in Washington, D.C.

He is also a recognized bet-the-company litigator. Paul has defended securities/financial...

602.650.2098
T.J. Mitchell Commercial Litigation Lawyer Polsinelli Law Firm
Associate

Thomas (T.J.) Mitchell is an associate in the Commercial Litigation practice group. T.J. partners with Polsinelli’s seasoned attorneys to provide litigation solutions in complex financial and business disputes, manage clients’ risk, and allow clients to focus on driving their business or personal objectives. Drawing from his experience working in the legal department of a large technology company, T.J. understands what clients expect from their outside counsel or personal attorney and takes the time to understand their unique challenges, goals, and values. These priorities shape his work...

602-650-2005
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