- Coinbase sued by the California federal court for illegal XRP sales.
- Also, Coinbase has recently applied to conduct an IPO scheduled for 2021.
- On the other note, Ripple is currently facing a lawsuit from the US Securities and Exchange Commission
As per the lawsuit, Coinbase knew that XRP was not a commodity but rather a security under federal securities law. Nonetheless, Coinbase continued offering XRP to the public and charged commissions for sale.
Thomas C. Sandoval, the St. Louis County-based plaintiff, filed the complaint in the Northern District Court of California. At length, the complaint reads:
Coinbase sold a token called Ripple (hereafter referred to by its trading symbol: XRP), the value of which was entirely linked to the success or failure of Ripple Labs, Inc. (Ripple Co.) the company that created the token, and the managerial efforts of Ripple Co. executives. Investors in XRP, such as Plaintiff, reposed an expectation of profit in such managerial efforts by Ripple Co. executives and purchased the token in order to make money on their investment.
Despite this, Anderson Kill partner Stephen Palley says he doesn’t assess this as a huge risk to Coinbase. More so, these allegations of fraud regarding unfair competition laws are based “on ‘information and belief. Hence, the lawsuit is most likely to fail.
New one count California federal court lawsuit alleges Coinbase violated state unfair competition laws by selling XRP, alleged to be an unregistered security, and taking commissions from the sale. pic.twitter.com/BpMZO1ulcC
— Palley (@stephendpalley) December 30, 2020
Amid all this, Coinbase has applied to conduct an initial public offering (IPO) which is scheduled for 2021.
Ripple Faces Lawsuit Over Unlicensed Security
On another note, Ripple Labs is currently facing a lawsuit from the US Securities and Exchange Commission. Specifically, SEC is claiming that XRP is a security Ripple has been selling for seven years without registering it or seeking an exemption. Furthermore, it raised $1.3 billion in the process.
Ripple’s executive CEO Brad Garlinghouse notes that SEC has “not only attacked Ripple but the entire crypto industry and American innovations”. With this, Coinbase notes that it is going to suspend XRP trading from January 19, 2021.