Ripple Labs Inc. failed to persuade a judge to throw out a proposed class-action lawsuit that the blockchain payment services provider said could topple the market for XRP, the world’s third-largest virtual currency.
A federal judge in Oakland, California, on Wednesday somewhat narrowed the claims against Ripple but left largely intact a complaint by investors accusing the company of selling unregistered securities.
The judge disagreed with Ripple’s argument that the lawsuit wasn’t timely because it was filed more than five years after XRP was offered in 2013.
Ripple said in a November court filing that if the case were to move forward, “it would upend and threaten to destroy the established XRP market more broadly — a market involving over $500 billion in trading over the last two years.”
The investors claimed they lost money after selling their XRP tokens because they were duped by Ripple’s promotional statements.
Wednesday’s ruling comes amid concern that regulators will find XRP to be an unregistered security, and potentially stop its trading. The U.S. Securities and Exchange Commission hasn’t taken a position on whether XRP is a security.
U.S. District Judge Phyllis Hamilton rejected Ripple’s request to toss out claims that it violated federal securities law. Hamilton dismissed certain claims that Ripple made false statements under California law. But she gave investors another shot at pursuing those claims in an amended complaint.
Ripple representatives didn’t immediately respond to an email seeking comment on the ruling.
XRP fell 8.2% to about 23 cents at the close of New York trading, according to prices compiled by Bloomberg. It has slumped about 14% this week.
The case is Zakinov v. Ripple Labs Inc., 18-cv-06753, U.S. District Court, Northern District of California (Oakland).
— Malathi Nayak (Bloomberg)