September 28, 2020

Volume X, Number 272

September 25, 2020

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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

Shareholder

Richard Levin 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 experiencing rapid changes that are producing innovative new technologies: digital currencies, blockchain technology, peer to peer lending, robo advisors, crowdfunding portals, and...

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Paul Roshka, Polsinelli, financial securities lawyer
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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 claims in federal and state court, including class action defense. He is a seasoned litigator trusted to resolve our clients’ disputes. Paul and the lawyers he supervises know it is important to keep clients informed, and provide value for the services they render. He handles arbitrations and mediations nationwide. He also serves as a mediator in securities and complex matters involving real estate and other financial claims.

Paul’s passion for resolving complex disputes is equally matched by his passion for positively impacting his community. He has spearheaded numerous significant charitable efforts that have directly and positively impacted the lives of thousands of Arizona children and families. He is a Chairman Emeritus of Phoenix Children’s Hospital, a Past Chairman of the Hospital’s Foundation, Past Chairman of the Children’s Cancer Center and Past Chairman of Phoenix Suns Charities. Paul has served on the Boards of the Salvation Army and Xavier College Preparatory School.  Paul is currently on the Board of Southwest Human Development, an organization that seeks to create a positive future for every child. 

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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...

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