Ripple CEO faces lawsuit over alleged 'misleading statements' in 2017 interview

Ripple Labs, the blockchain company criticized for its sale of XRP tokens, faces a new legal battle as a civil securities action against its CEO, Brad Garlinghouse, was given the green light by a court judge federal government of California.

The lawsuit, which alleges Garlinghouse made “misleading statements” during a 2017 interview, will now move to trial, with a jury set to hear the case.

The trial centers around an interview Garlinghouse gave to BNN Bloomberg in 2017, where he said he was “very, very long” on XRP. However, the plaintiffs claim that this statement was misleading because Garlinghouse allegedly sold millions of XRP in the same year.

Last year, Judge Phyllis Hamilton dismissed four claims related to Ripple's failure to register XRP as collateral. However, the judge allowed the allegation regarding Garlinghouse's alleged misleading statements to go forward.

This lawsuit is separate from the ongoing legal battle between Ripple and the Securities and Exchange Commission (SEC), which alleges that XRP is a security.

In July 2023, a federal court in New York ruled that selling XRP on exchanges and through algorithms did not violate U.S. securities laws, but sales to institutions did.

In the California case, Ripple's lawyers argued that the allegations of misleading statements should be dismissed because XRP is not a security under the Howey test. They also cited the New York court order to support their arguments.

However, Justice Hamilton noted that XRP could be considered a security when sold to non-institutional investors, as they would expect profits from Ripple's efforts.

“The court declines to conclude, as a matter of law, that a reasonable investor would have derived any expectation of profit from general trends in the cryptocurrency market, as opposed to Ripple's efforts to facilitate the use of XRP in cross-border payments, among other things ” the judge said. wrote in a file.

Edited by Stacy Elliott.