Breaking Stories

Coinbase Faces Class-Action Suit Over Sales Of Ripple’s XRP

A week after the U.S. Securities and Exchange Commission filed a lawsuit against Ripple Labs and some of its executives, alleging the company illegally skirted laws by classifying its XRP cryptocurrency as a commodity rather than a security, a Missouri man has sued Coinbase over its role selling XRP.

Thomas Sandoval argued in his complaint that he and other investors in XRP were denied adequate insight into the risks associated with the investment because it wasn’t treated as a security when it should have been. He alleged Coinbase employees knew XRP was a security when they facilitated trading in it — transactions for which Coinbase collected a commission. Sandoval’s arguments closely track those contained in a civil suit the SEC filed Dec. 22 against Ripple Labs.

The government alleged in the complaint that Ripple Labs and some executive raised $1.3 billion illegally since 2013 by calling XRP a commodity when in reality it was more like a security, according to a press release.

SEC Enforcement Division Director Stephanie Avakian said in the release issued when the government’s complaint was filed last week: “Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution and a secondary trading market, must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies. We allege that Ripple, [Co-Founder Chris] Larsen, and [CEO Brad] Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”

Marc P. Berger, deputy director of the SEC’s Enforcement Division, added in the release: “The registration requirements are designed to ensure that potential investors — including, importantly, retail investors — receive important information about an issuer’s business operations and financial condition. Here, we allege that Ripple and its executives failed over a period of years to satisfy these core investor protection provisions, and as a result, investors lacked information to which they were entitled.”

Garlinghouse said in an interview prior to the filing of the suit, but anticipating it, that government litigation would be an “attack” on all cryptocurrency and innovation.

Coinbase’s chief legal officer issued a statement Monday (Dec. 28) saying the company would suspend trading of XRP as of Jan. 19.

What is your reaction?

In Love
Not Sure

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *