Ripple Bears the Brunt of More Legal Drama
Third time’s certainly not the charm in the Blockchain-verse. Ripple (XRP) and CEO Brad Garlinghouse got buried deep in legal scandal after landing a third law securities fraud lawsuit in three months. The allegation this time: price manipulation to turn a profit.
Turning to the screener platform at Coinwatch.com, we caught up on buzzing market stats in the crypto-verse. How does the current snapshot look for Ripple?
It does not help Ripple that the crypto market drained a colossal $20 billion yesterday. At the time of writing, Ripple’s price has dipped to $0.44.
That’s a steep 33% crash from May 17, when the price at least was $0.66, and certainly a far cry from the highs of January 4, where Ripple roared up to $2.73. Ripple investors have gritted their teeth through an almost 84% plummet in just six months.
Still, all things considered, Ripple is the third leading coin with a market cap of $17 billion. In a volatile era for cryptocurrency, at least Ripple has fighting odds for survival; especially as its xCurrent technology has garnered worldwide adoption by a slew of financial institutions.
Ripple’s senior vice president of product Asheesh Birla believes the worst threat against the crypto player is regulation. Accordingly, at a panel session called ‘Scaling and Digital Disruption in Fintech,’ the leader intends to address the risk before it becomes a problem: “We are going around the world making sure that for the next 1,000 customers that we want to bring on… which we think we can do in the next two years … that regulation is not going to be an issue.”
Another key question brought up by this latest lawsuit: is Ripple a security or utility token? Security classification could be seen to dial up a notch on the litigation risk factor for the company. For this reason, the crypto coin was denied purchase access to two U.S. cryptocurrency exchanges: Coinbase and Gemini. These exchanges could open a window to a jump in price as well as liquidity for Ripple.
The uproar about whether or not Ripple is a security is precisely what has landed the cryptocurrency in hot water here. According to the Howey Test criteria (a U.S. Supreme Court-approved framework determining if an asset can be considered a security), the coin’s classification borders on security.
Ripple CEO Garlinghouse at the time contended why Coinbase ought to list the cryptocurrency XRP, defending the coin: “I think it’s really clear that XRP is not a security. XRP exists independent of Ripple and it would operate even if Ripple Labs failed. I don’t think that our ownership of XRP gives us control. Saudi Arabia owns a lot of oil that doesn’t give them control of oil.”
Moreover, Garlinghouse went on to argue that the XRP ledger “exists independent of Ripple” as “open-source, decentralized technology.” After all, “buying XRP doesn’t give you ownership of Ripple, it doesn’t give you access to dividends or profits that come from Ripple,” explained the CEO, who believes: “XRP is solving a problem. There’s no utility in a security.”
However, one can’t ignore it lies in Ripple’s advantage for XRP to be classified as a utility: this means skipping past SEC interference. The fact of the matter is Ripple owns over 50% of XRP’s supply. This raises the question: just how decentralized is the token after all? Here lies the point of contention, and the source of the latest class-action lawsuit, claiming the company “created the XRP token and then used sales of the tokens in order to fund its operations and the development of the XRP ecosystem.”
A private XRP investor caught wind and went on to file the third suit against Ripple alleging a securities law violation. In the suit, lead plaintiff David Oconer takes a shot at Ripple Labs and Garlinghouse, calling for a security classification for the XRP coin. The very peak of Ripple’s best price has now been called into question, with the lawsuit questioning if executives like Garlinghouse intentionally kicked up XRP’s price.
By Monday, Ripple took steps to separate its digital token from Ripple, with the team tweeting out: “The digital asset #XRP and the company #Ripple are distinctly different.” The company drew a line, calling Ripple a tech company and XRP “an independent digital asset,” where “the XRP ledger is the open source blockchain technology behind it.”
The verdict deciding XRP’s fate as security or utility will be crucial to Ripple’s future. The Ripple team is hard at work now to rebrand XRP. How will the court’s decision impact the price of the XRP coin? For now, investors will be riding the volatile crypto wave to see if this token can make it through the legal hurricane.
While we keep a close eye on the market, you can keep up with the latest crypto trends and developments using the screener platform on Coinwatch.com.
Author: Julie Lamb.