Ripple Labs, the cryptocurrency startup behind the XRP tokens, is being accused in a new lawsuit of running a scam to raise hundreds of millions of dollars via unregistered XRP coins, reported Bloomberg.
The report, citing a class-action lawsuit filed in The Superior Court of California late last week, reported that the plaintiff, Ryan Coffey, alleges the company created billions of XRP tokens “out of thin air” and profited by selling them and pushing them to the public in what the lawsuit called “essentially a never-ending initial coin offering.”
Coffey is seeking unspecified damages, and wants Ripple Labs and its CEO, Brad Garlinghouse, to declare that the company sold unregistered securities. Coffey wants the lawsuit to move forward on behalf of all people who purchased Ripple tokens.
“We’ve seen the lawyer’s tweet about a recently filed lawsuit but have not been served. Like any civil proceeding, we’ll assess the merit or lack of merit to the allegations at the appropriate time,” Ripple spokesman Tom Channick said in an emailed statement to Bloomberg. “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.”
According to Bloomberg, the U.S. Securities and Exchange Commission (SEC) said in July that companies that raise money via initial coin offerings have to meet federal securities laws. It has already subpoenaed companies and individuals that were behind ICOs that may have run afoul of the law, noted the report, citing a person with direct knowledge of the matter.
“XRP is a security,” the plaintiff said in the lawsuit. “Defendants themselves have recognized that XRP investors have a reasonable expectation of profit, and publicly touted XRP’s price performance on numerous occasions.”
Coffey bought 650 XRP tokens for around $2.60 each in the beginning of the year and sold them for a loss of about 32 percent a few weeks later.