Ripple is set for new legal battles after a US judge in California approved a lawsuit against the crypto company regarding alleged misleading statements by its CEO, Brad Garlinghouse.
This means the case would go to trial, and a jury would decide if the Ripple boss had misled investors into investing in the digital asset via a televised 2017 interview with the Business News Network where he said:
“I’m long XRP, I’m very, very long XRP as a percentage of my personal balance sheet. . . . . [I am] not long on some of the other [digital] assets, because it is not clear to me what’s the real utility, what problem are they really solving . . . if you’re solving a real problem, if it’s a scaled problem, then I think you have a huge opportunity to continue to grow that. We have been really fortunate obviously, I remain very, very, very long XRP, there is an expression in the industry HODL, instead of hold, it’s HODL… I’m on the HODL side.”
Ripple tried to dismiss the “misleading statement” claim by arguing that XRP was not a security. However, Judge Phyllis Hamilton noted that while XRP may not be classified as a security, it could still be considered one when sold to non-institutional investors.
The judge highlighted that investors’ expectation of profit could render XRP a security, aligning with one of the parameters of the Howey Test. She further noted that Ripple’s actions, such as its efforts to promote using XRP in cross-border payments and other uses, could lead investors to expect profits from XRP.
As a result, Judge Hamilton stated:
“Accordingly, the [Court] cannot find as a matter of law that Ripple’s conduct would not have led a reasonable investor to have an expectation of profit due to the efforts of others.”
Ripple has yet to respond to CryptoSlate’s request for comment as of press time.