In a new hearing at the court on June 20, Judge Phyllis Hamilton dismissed 4 civil class actions against Ripple Labs in which substantial damages were sought for selling the crypto XRP in California without the necessary registration requirements.
The same judge, however, in addition to establishing the transfer of the civil securities case to trial, expressed disagreement with the ruling by Judge Annalisa Torres in a case where it was determined that XRP was not a security.
Now Ripple must face new potential classifications of its cryptographic asset as a financial security.
Let’s see all the details below.
The judge Phyllis Hamilton dismisses 4 claims for damages against Ripple
On June 20, California judge Phyllis Hamilton denied all 4 claims for damages against Ripple Labs in a civil class action that indicated the crypto company as responsible for selling unregistered securities in the form of its own crypto XRP.
In court it was established that the 2017 case in which it is claimed that RIpple had violated State laws will proceed to trial, partially denying the motion for summary judgment requested by the lawyers representing the cryptographic company.
Phyllis Hamilton has ruled that a jury will decide if the CEO Brad Garlinghouse made “misleading” statements in a 2017 interview in which the prosecution identified a clear invitation to invest.
In fact, Garlinghouse on that occasion, referring to an intervention at BNN Bloomberg, explicitly said he was “very bullish” on the crypto XRP with a significant portion of his portfolio, and not equally optimistic about other digital assets given their lack of utility.
The court partially disputes the fact that Garlinghouse allegedly sold millions of dollars in XRP that year, precisely while declaring to be bull on the crypto asset.
Now the resolution of the case is expected at the trial, where the judicial function will be exercised with a final judgment.
In the meantime, Stu Alderoty, Chief Legal Officer of Ripple, in an interview declares to be happy in this first phase that the Californian court has rejected the compensation claims against the company:
“We are pleased that the California court has dismissed all class action claims. The only surviving state law claim will be addressed at trial”
The crypto Ripple (XRP) again as security: the possible decision of the court jury
Despite Judge Phyllis Hamilton rejecting the compensation claims for the ongoing class actions against Ripple Labs, new possible classification risks have emerged under the term “security” for the crypto XRP.
In fact, Hamilton, while recognizing Garlinghouse’s request to dismiss the final misleading sale of the title from the accusation, since XRP is not a title under the Howey Test, clashed with the previous decision of July 2023 by fellow judge Annalisa Torres.
On that occasion, during a lawsuit between Ripple and SEC, Torres had established that XRP was not a security, but now everything will have to be reviewed.
This does not mean that the ruling expressed in 2023 is no longer valid, but there could be some complications if XRP were to be identified again as an unregistered security.
Alderoty di Ripple ha dichiarato infatti:
“The ruling of Judge Torres in the SEC case is still valid and nothing here disturbs that decision.”
Hamilton contests the fact that Ripple was aware of the profit expectations of non-institutional investors, which is one of the key principles of the Howey test.
According to what was said by the same Californian judge:
“The court refuses to legally determine that a reasonable investor would have derived any expectation of profit from the general trends of the cryptocurrency market, as opposed to Ripple’s efforts to facilitate the use of XRP in cross-border payments, among other things.”
The key point is that Garlinghouse had explicitly said he was bullish on the cryptocurrency, inviting investment in an asset on which an investor could reasonably expect a profit.
On the other hand, Ripple supporters note that it was not the cryptographic company that sold the financial product, but rather the exchange of exchange.
The promotional activity of Ripple which Judge Hamilton may be treating with more weight than Judge Torres could give the expectation. There seems to be some additional evidence of promotional statements before Judge Hamilton. The whole remaining cause of action going forward… https://t.co/Cd1RS4xQgX
— bill morgan (@Belisarius2020) June 21, 2024
Simultaneously with the evolution of the civil lawsuit against RIpple Labs, the Securities and Exchange Commission (SEC) of the United States has refused to reduce the 876 million dollar judgment advanced against the same company in a March case of 2 billion dollars for violation of U.S. securities laws.
Ripple had requested a resolution of the case with a reduction of the penalty to 10 million dollars, but it was denied.
