Ripple hit with class-action suit

new york — Ripple Labs, the fintech startup that controls the world’s third-largest cryptocurrency, was hit by a lawsuit alleging that it led a scheme to raise hundreds of millions of dollars through unregistered sales of its XRP tokens.

The San Francisco-based company created billions of coins “out of thin air” and then profited by selling them to the public in “what is essentially a never-ending initial coin offering,” the class-action complaint filed on Thursday in the Superior Court of California said. Ripple violated state and federal laws by offering unregistered securities to retail investors, the filing said.

The plaintiff, investor Ryan Coffey, is seeking unspecified damages and a declaration that Ripple Labs and Chief Executive Officer Bradley Garlinghouse sold unregistered securities. Coffey is seeking to proceed on behalf of all purchasers of Ripple tokens.

“We’ve seen the lawyer’s tweet about a recently filed lawsuit but have not been served. Like any civil proceeding, we’ll assess the merit or lack of merit to the allegations at the appropriate time,” Ripple spokesman Tom Channick said in an emailed statement. “Whether or not XRP is a security is for the SEC to decide. We continue to believe XRP should not be classified as a security.”

The US Securities and Exchange Commission said in July that companies which raise money through the sale of digital assets must adhere to federal securities laws. The SEC has also subpoenaed firms and individuals behind coin offerings it believes might be breaking the law, a person with direct knowledge of the matter said earlier this year. An SEC spokesman declined to comment on the agency’s view of XRP at the time. — Bloomberg