Ninth Circuit Court Dismisses Class Action Against Ripple Labs
The Ninth Circuit Court of Appeals has decisively concluded one of the most protracted legal disputes in the cryptocurrency realm by dismissing the class action case Sostack v. Ripple Labs. The ruling determined that the claims made by lead plaintiff Bradley Sostack concerning federal securities violations were barred due to the Securities Act’s three-year statute of repose.
Background of the Legal Battle
This legal battle traces back to 2018 when it was initiated, centered around claims that Ripple Labs, along with its subsidiary XRP II, LLC and its CEO Brad Garlinghouse, breached federal securities regulations by distributing XRP without registering it as a security.
Bradley Sostack, representing the collective of plaintiffs, had acquired XRP in early January 2018, during a booming phase for cryptocurrencies. Following a significant drop in XRP’s price, he sought legal recourse to reclaim his financial losses, alleging that Ripple executed an improper public offering devoid of the necessary registration documentation.
Statute of Repose and Court Ruling
However, the lawsuit confronted a formidable barrier known as the statute of repose, outlined in Section 13 of the Securities Act, which prohibits any legal actions for unregistered securities more than three years after such securities are deemed ‘bona fide offered to the public.’ The appeals court concurred with the lower court’s interpretation, ruling that the clock on this statute commenced in 2013, predating Sostack’s 2018 filing.
The court relied on evidence indicating that Ripple had begun providing XRP to the public as early as 2013, selling over 500 million units on its exchange during that timeframe. Consequently, the time limit for Sostack to lodge a federal securities claim had lapsed by 2016, making his complaint filed in 2018 legally untenable.
The Ninth Circuit panel affirmed the lower court’s summary judgment favoring Ripple, stating, “His federal securities claims are time-barred.”
Arguments and Conclusion
In a bid to revive the lawsuit, the plaintiffs contended that Ripple’s actions in 2017 constituted a new offering, thereby resetting the three-year countdown. This argument was firmly dismissed by the Ninth Circuit, which asserted that the core characteristics of XRP remained unchanged from its introduction in 2013 to the sales in 2017, stating, “All XRP cryptocurrency remained fungible and interchangeable.”
