Ripple can’t seem to catch a break at the moment after a Florida-based businessman sues them for selling XRP without following regulations. The plaintiff, whose name is Tyler Toomey, sued the open-source protocol for selling a significant amount of XRP while disregarding Florida’s security regulations. XRP tokens are considered securities under the state of Florida’s law.
The class-action suit also states that most of the blockchain company’s revenue came from selling XRP. Reports also suggest returns from the token sales were what Ripple used to fund its daily business operations. US Financial watchdogs SEC are currently battling with the company in court over its ‘illegal token sales’ operations.
The suit has been extended to the platform’s CEO, Brad Garlinghouse, who is said to have reaped heaps of profits from the sales. Garlinghouse allegedly sold millions of dollars worth of XRP from early 2017 to late 2019. According to the SEC, he made a fortune selling XRP while convincing the public that it was the perfect investment plan. The SEC considers the action a sort of market manipulation.
Ripple’s Cloud with No Silver Lining
The blockchain startup is arguably being followed by a series of consequences for actions it took to make XRP bullish. Tyler Toomey, who resides in Jacksonville, Florida, purchased 135 XRP tokens in late 2020. Weeks later, he sold the tokens incurring almost 50% loss from his initial placings.
Tyler reckons Ripple would have given clear guidelines concerning the issuance of XRP. Since the company was never in compliance with the law, it didn’t genuinely show how the market should handle the token. The result emerged to be jaw-dropping loss cries from several Florida investors angered by Ripple’s alleged misinformation.
The filed suit also mentions that Ripple ignored the claims of XRP being considered an investment contract back in 2012. Despite being fully aware of the XRP classification, the blockchain giants proceeded to issue the token without registration. The startup even publicly denounced that XRP is not a security, misleading Florida merchants.
FinCen’s Proposal to Avoid Ripple’s Problematic Spell
FinCen recently extended the comment period of their Notice of Proposed Rulemaking(NPRM), regarding transactions of various convertible virtual currencies and digital assets. The NPRM is required to settle the vibrant uncertainties circulating unhosted wallets, by collecting the names of people who own such wallets. The period has been extended by 60 days.
The Federal unit proposed the rule to ensure that crypto investors know what they financially involve themselves in. Towards the end of last year, US Treasury Secretary Janet Yallen said vivid consultations should occur while making controversial crypto-regulations.