Ripple is facing a securities case in California over its CEO’s misleading statements

A U.S. federal court judge has greenlit a civil securities lawsuit against Ripple Labs, rejecting a bid for summary judgment filed by its CEO for allegedly violating California securities laws.

In a June 20 ruling, U.S. District Court Judge Phyllis Hamilton of the Northern District Court of California ruled that Ripple boss Brad Garlinghouse made “misleading statements” in a 2017 interview. The order dropped four charges surrounding Ripple's “failure to register XRP as a security.”

In the year In a 2017 interview with Canada's BBN Bloomberg, Garlinghouse said he was “very, very long” on XRP (XRP) — but claims the claim was false, having “sold millions of XRP” that year.

“We are pleased that the California court dismissed all class action claims. Any remaining individual state law claims will be handled at trial,” Ripple Chief Legal Officer Stu Alderotti said in an emailed statement to Cointelegraph.

In the order, Hamilton cited a landmark July 2023 decision by Judge Analisa Torres in a case between U.S. and U.S. Securities, arguing that Ripple's “misrepresentation” claim should be dropped because XRP was not a security in the Hawaii test. Exchange Commission and Ripple.

However, Hamilton disagreed and instead found that XRP could be a security when sold to non-institutional investors. She said they expect profits from Ripple's efforts, which is one of the markers used in the Hawaii test.

“The court did not allow a reasonable investor to expect any profit from the general kriptovalyutnyh market trends as a matter of law, unlike Ripple to facilitate the use of XRP in cross-border payments, among other things.”

“Accordingly, [court] I cannot find as a rule that Ripple's behavior would not lead a reasonable investor to expect profits due to other efforts,” Hamilton wrote.

Ripple's Alderoty said, “The ruling from Judge Torres in the SEC case still stands and there is nothing disturbing here.

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Many in the US crypto industry criticized Torres's ruling in 2016. They hailed it as a major win for the space in 2023, believing other judges will use it as an example when weighing other crypto issues.

But it is not having as much impact as it is supposed to.

In the SEC's case against Terraform Labs, presiding judge Jed Rakoff — from the same court as Torres — disagreed with Ripple's decision to deny Terraform's motion to dismiss in August.

Terraform lost the case, having to pay a $4.5 billion settlement to the SEC.

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Update (June 21, 3:50 am UTC): This article has been updated to add comments from Ripple's Stu Alderoty.