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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 1 of 22
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`Damien J. Marshall (Admitted pro hac vice)
`dmarshall@bsfllp.com
`BOIES SCHILLER FLEXNER LLP
`55 Hudson Yards, 20th Floor
`New York, NY 10001
`Telephone:
`(212) 446-2300
`Facsimile:
`(212) 446-2350
`
`Maxwell V. Pritt (SBN 253155)
`mpritt@bsfllp.com
`BOIES SCHILLER FLEXNER LLP
`44 Montgomery Street, 41st Floor
`San Francisco, CA 94104
`Telephone:
`(415) 293-6800
`Facsimile:
`(415) 293-6899
`
`Menno Goedman (SBN 301271)
`mgoedman@bsfllp.com
`BOIES SCHILLER FLEXNER LLP
`1401 New York Avenue, N.W.
`Washington, DC 20005
`Telephone:
`(202) 237-2727
`Facsimile:
`(202) 237-6131
`
`Attorneys for Defendants Ripple Labs Inc.,
`XRP II, LLC, and Bradley Garlinghouse
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`OAKLAND DIVISION
`
`
`In re RIPPLE LABS INC. LITIGATION,
`
`
`This Document Relates To:
`All Actions
`
` Case No. 18-cv-06753-PJH
`
`NOTICE OF MOTION AND MOTION TO
`DISMISS COUNTS FOUR, SIX, AND SEVEN
`OF THE CONSOLIDATED FIRST AMENDED
`COMPLAINT; MEMORANDUM OF POINTS
`AND AUTHORITIES IN SUPPORT
`Date: August 26, 2020
`Time: 9:00 am
`Place: Courtroom 3
`Judge: Hon. Phyllis J. Hamilton
`
`Consolidated First Amended Complaint filed:
`March 25, 2020
`
`
`
`
`
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
`
`

`

`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 2 of 22
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`
`
`NOTICE OF MOTION AND MOTION
`PLEASE TAKE NOTICE that on August 26, 2020 at 9:00 am, or as soon thereafter as the matter
`may be heard, in the courtroom of the Honorable Phyllis J. Hamilton, United States District Judge,
`Northern District of California, located at 1301 Clay Street, Oakland, CA 94612, Courtroom 3, Defendants
`Ripple Labs Inc. (“Ripple”), XRP II, LLC (“XRP II”), and Bradley Garlinghouse will move the Court to
`dismiss Counts Four, Six, and Seven of Lead Plaintiff Bradley Sostack’s Consolidated First Amended
`Complaint for Violations of Federal and California Law, Dkt. 87. Defendants’ Motion is made pursuant
`to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure and seeks dismissal with prejudice.
`The Motion is based on this Notice of Motion and supporting Memorandum of Points and Authorities,
`reply briefing in further support of this Motion, any matters of which this Court may take judicial notice,
`the arguments of counsel, and any such other matters as the Court may consider.
`
`Dated: June 8, 2020
`
`Respectfully Submitted,
`
`
`By: /s/ Damien J. Marshall
`Damien J. Marshall (Admitted pro hac vice)
`BOIES SCHILLER FLEXNER LLP
`55 Hudson Yards, 20th Floor
`New York, NY 10001
`Telephone: (212) 446-2300
`Email: dmarshall@bsfllp.com
`
`Maxwell V. Pritt (SBN 253155)
`BOIES SCHILLER FLEXNER LLP
`44 Montgomery Street, 41st Floor
`San Francisco, CA 94104
`Telephone: (415) 293-6800
`Email: mpritt@bsfllp.com
`
`Menno Goedman (SBN 301271)
`BOIES SCHILLER FLEXNER LLP
`1401 New York Avenue, N.W.
`Washington, DC 20005
`Telephone: (202) 237-2727
`Email: mgoedman@bsfllp.com
`
`Attorneys for Defendants Ripple Labs Inc.,
`XRP II, LLC, and Bradley Garlinghouse
`
`i
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 3 of 22
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`
`
`TABLE OF CONTENTS
`NOTICE OF MOTION AND MOTION ..................................................................................................... i
`MEMORANDUM OF POINTS AND AUTHORITIES ............................................................................ 1
`I.
`INTRODUCTION .............................................................................................................. 1
`II.
`STATEMENT OF ISSUE TO BE DECIDED.................................................................... 1
`III.
`FACTUAL BACKGROUND ............................................................................................. 1
`A.
`Defendants .............................................................................................................. 1
`B.
`XRP and the XRP Ledger ....................................................................................... 2
`C.
`XRP Sales, Including Plaintiff’s Alleged Purchases .............................................. 3
`PROCEDURAL HISTORY................................................................................................ 3
`STANDARD OF REVIEW ................................................................................................ 4
`THE FRAUD CLAIMS STILL DO NOT SATISFY RULE 9(b) ...................................... 4
`A.
`Statements Concerning XRP’s Utility .................................................................... 5
`B.
`Statement that XRP Is at an “All Time High” ........................................................ 7
`C.
`Statements Concerning Mr. Garlinghouse Being “Long” XRP .............................. 8
`D.
`Statement in CNBC Headline ................................................................................. 9
`E.
`Statements Allegedly Conflating Ripple Enterprise Solutions and XRP ............. 11
`VII. PLAINTIFF’S FRAUD CLAIMS SHOULD BE DISMISSED WITH PREJUDICE ..... 15
`VIII. CONCLUSION ................................................................................................................. 15
`
`IV.
`V.
`VI.
`
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`ii
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 4 of 22
`
`
`
`TABLE OF AUTHORITIES
`
`Cases
`Bell Atl. Corp. v. Twombly,
` 550 U.S. 544 (2007) ............................................................................................................................. 1
`Beyer v. Symantec Corp.,
` 333 F. Supp. 3d 966 (N.D. Cal. 2018) ................................................................................................. 8
`Bly-Magee v. California,
` 236 F.3d 1014 (9th Cir. 2001) ............................................................................................................. 4
`Cansino v. Bank of Am.,
` 224 Cal. App. 4th 1462 (2014) ............................................................................................................ 5
`CFTC v. McDonnell,
` 287 F. Supp. 3d 213 (E.D.N.Y. 2018) ................................................................................................. 2
`Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co.,
` 173 F.3d 725 (9th Cir. 1999) ............................................................................................................. 12
`Depot, Inc. v. Caring for Montanans, Inc.,
` 915 F.3d 643 (9th Cir. 2019) ................................................................................................. 4, 5, 8, 15
`In re Fusion-io, Inc. Sec. Litig.,
` No. 13-CV-05368-LHK, 2015 WL 661869 (N.D. Cal. Feb. 12, 2015) ............................................... 8
`In re GlenFed Sec. Litig.,
` 42 F.3d 1541 (9th Cir. 1994) ............................................................................................................... 4
`In re iPass, Inc. Sec. Litig., No. C05-00228 MHP,
` 2006 WL 496046 (N.D. Cal. Feb. 28, 2006) ....................................................................................... 7
`In re Phila. Newspapers, LLC,
` 690 F.3d 161 (3d Cir. 2012) ................................................................................................................ 9
`Info. Control Corp. v. Genesis One Computer Corp.,
` 611 F.2d 781 (9th Cir. 1980) ............................................................................................................... 5
`Kiehn v. Stein,
` No. C 12-6554 PJH, 2013 WL 1789718 (N.D. Cal. Apr. 26, 2013) ................................................... 9
`Lockheed Martin Corp. v. Network Solutions, Inc.,
` 194 F.3d 980 (9th Cir. 1999) ............................................................................................................. 15
`Lokhova v. Halper,
` No. 1:19-cv-832 (LMB/JFA), 2020 WL 963032 (E.D. Va. Feb. 27, 2020) ........................................ 9
`Marolda v. Symantec Corp.,
` 672 F. Supp. 2d 992 (N.D. Cal. 2009) ............................................................................................... 10
`Mirage Entm’t, Inc. v. FEG Entretenimientos S.A.,
` 326 F. Supp. 3d 26 (S.D.N.Y. 2018) ............................................................................................. 9, 13
`
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`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 5 of 22
`
`
`Mostowfi v. i2 Telecom Intern., Inc.,
` 269 Fed. App’x 621 (9th Cir. 2008) .................................................................................................... 4
`Neu-Visions Sports, Inc. v. Soren / McAdam / Bartells,
` 86 Cal. App. 4th 303 (2000) ................................................................................................................ 7
`Omnicare, Inc. v. Laborers Dist. Counsel Const. Indus. Pension Fund,
` 575 U.S. 175 (2015) ........................................................................................................................... 10
`Palantir Techs., Inc. v. Palantir.net, Inc.,
` No. C 10-04283 CRB, 2011 WL 62411 (N.D. Cal. Jan. 7, 2011) ....................................................... 1
`Reddy v. Nuance Commc’ns, Inc.,
` No. 11-CV-05632-PSG, 2012 WL 12818726 (N.D. Cal. Mar. 26, 2012) ........................................... 1
`Retail Wholesale & Dep’t Store Union Local 338 Ret. Fund v. Hewlett-Packard Co.,
` 845 F.3d 1268 (9th Cir. 2017) ............................................................................................................. 7
`Roe v. Doe,
` No. C09-0682 PJH, 2009 WL 1883752 (N.D. Cal. June 30, 2009) ........................................ 9, 11, 12
`Rubke v. Capital Bancorp Ltd.,
` 551 F.3d 1156 (9th Cir. 2009) ..................................................................................................... 11, 14
`Salameh v. Tarsadia Hotel,
` 726 F.3d 1124 (9th Cir. 2013) ............................................................................................................. 4
`Salstein v. Ha-Lo Indus., Inc.,
` 82 F. Supp. 2d 1080 (N.D. Cal. 1999) ................................................................................................. 5
`Swartz v. KPMG LLP,
` 476 F.3d 756 (9th Cir. 2007) ............................................................................................................. 15
`Vess v. Ciba-Geigy Corp. USA,
` 317 F.3d 1097 (9th Cir. 2003) ......................................................................................................... 4, 5
`ZL Tech., Inc. v. Gartner, Inc.,
` 709 F. Supp. 2d 789 (N.D. Cal. 2010) ................................................................................................. 5
`
`Statutes
`California Business and Professions Code Section 17200 ......................................................................... 1
`California Business and Professions Code Section 17500 ......................................................................... 1
`California Corporations Code Section 25110 ............................................................................................. 3
`California Corporations Code Section 25401 ............................................................................................. 1
`California Corporations Code Section 25503 ............................................................................................. 3
`California Corporations Code Section 25504 ............................................................................................. 3
`
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`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 6 of 22
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`
`
`Rules
`Federal Rules of Civil Procedure 9(b) ............................................................................................... passim
`Federal Rules of Civil Procedure 12(b)(6).............................................................................................. 1, 4
`
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`v
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 7 of 22
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`
`
`I.
`
`MEMORANDUM OF POINTS AND AUTHORITIES
`INTRODUCTION
`This Court previously dismissed Plaintiff’s Fourth, Sixth, and Seventh Counts (collectively, “the
`Fraud Claims”) because the alleged misrepresentations on which those claims depended did not satisfy
`Rule 9(b). Dkt. 85 at 40. By and large, the Court reasoned that Plaintiff failed to “explain how or why”
`the alleged misrepresentations were actually false. Id. at 32-36. Plaintiff’s Consolidated First Amended
`Complaint (“FAC”) attempts to resuscitate these claims, but fails because Plaintiff still has not alleged
`with particularity “how” and “why” the alleged misrepresentations are false. Plaintiff’s Fraud Claims
`should again be dismissed, this time with prejudice.1
`STATEMENT OF ISSUE TO BE DECIDED
`II.
`Whether Plaintiff’s Claims for Violation of Section 25401 of the California Corporations Code
`(Fourth Count), False Advertising in Violation of Business and Professions Code Section 17500 (Sixth
`Count), and Unfair Competition in Violation of Business and Professions Code Section 17200 (Seventh
`Count) should be dismissed with prejudice under Rule 12(b)(6) for failure to satisfy the pleading
`requirements of Rule 9(b).
`FACTUAL BACKGROUND
`III.
`Solely for purposes of this Motion, Defendants must accept that Plaintiff’s “allegations in the
`complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
`Defendants
`A.
`Ripple is a company headquartered in San Francisco that provides financial institutions with digital
`platforms for processing and sending instant, reliable, and cost-effective cross-border payments. FAC
`¶¶ 14, 60, 108. XRP II is a subsidiary of Ripple, also headquartered in San Francisco. Id. ¶ 15. Bradley
`Garlinghouse is Ripple’s CEO. Id. ¶ 16.
`
`
`1 Defendants reserve their right to answer all claims not at issue herein upon resolution of this
`Motion. See Palantir Techs., Inc. v. Palantir.net, Inc., No. C 10-04283 CRB, 2011 WL 62411, at *2 (N.D.
`Cal. Jan. 7, 2011) (“[W]hen a party moves to dismiss certain claims, but does not answer or move to
`dismiss others, the party has not admitted the allegations in the other claims.”); accord Reddy v. Nuance
`Commc’ns, Inc., No. 11-CV-05632-PSG, 2012 WL 12818726, at *1 (N.D. Cal. Mar. 26, 2012) (“By filing
`even a partial Rule 12(b) motion, Nuance’s time to answer or otherwise respond to the complaint is
`extended.”)
`
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`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 8 of 22
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`
`
`XRP and the XRP Ledger
`B.
`Like bitcoin and ether, XRP is a virtual currency. Id. ¶ 2. The XRP Ledger is an open-source
`blockchain technology, and XRP is the native cryptocurrency of the XRP Ledger. Id. ¶ 114.2 Unlike
`other cryptocurrencies, which use a resource-draining process of “mining,” all 100 billion XRP were
`created in 2013 and “fully generated prior to its distribution.” Id. ¶ 2. Financial institutions can use XRP
`to “source liquidity for payments into and out of emerging markets,” id. ¶ 47, or for “real-time cross-
`border payments,” id. ¶ 108. As of June 2015, Ripple held about 67 billion XRP, while others owned the
`remaining 33 billion. Id. ¶ 26.3
`In May 2015, the federal Departments of Treasury and Justice concluded and stated publicly that
`XRP is a “convertible virtual currency.” Dkt. 70-3 at 5 (cited in FAC ¶ 2 & n.2; see also id. ¶¶ 25, 118).
`This is consistent with the CFTC’s position that virtual currency is a commodity. See supra n.2.
`Nonetheless, Plaintiff alleges that XRP is a “security” under federal and state law, FAC ¶¶ 127–165, and
`that Defendants have offered and sold XRP without registering with securities authorities, id. ¶¶ 1, 7.
`More recently, in promulgating a Final Rule to address issues affecting the remittance market, the
`Bureau of Consumer Financial Protection noted that Ripple offers “both a payments messaging platform
`to support cross-border money transfers as well as a virtual currency, XRP, which can be used to effect
`settlement of those transfers.” Decl. of Maxwell V. Pritt (“Pritt Decl.”), Ex. A at 34880. The Bureau
`added that the “expanded adoption of . . . Ripple’s suite of products could similarly allow banks and credit
`unions to know the exact final amount that recipients of remittance transfers will receive before they are
`sent.” Id. Such developments, the Bureau emphasized, could “provide a great deal of certainty” to market
`participants. Id.
`
`
`
`2 As one court explained (in determining that “virtual currency may be regulated by the CFTC
`[Commodity Futures Trading Commission] as a commodity”), virtual currencies are “stored electronically
`in ‘digital wallets,’ and exchanged over the internet through a direct peer-to-peer system. They are often
`described as ‘cryptocurrencies’ because they use ‘cryptographic protocols to secure transactions . . .
`recorded on publicly available decentralized ledgers,’ called ‘blockchains.’” CFTC v. McDonnell, 287 F.
`Supp. 3d 213, 217, 218 (E.D.N.Y. 2018) (quoting Brief of the CFTC).
`3 As of May 24, 2020, others now hold approximately 44 billion XRP, and another approximately
`50
`billion XRP
`are
`inaccessible
`to Ripple
`until
`released
`from
`escrow.
`
`See
`https://www.ripple.com/xrp/market-performance.
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`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`XRP Sales, Including Plaintiff’s Alleged Purchases
`C.
`Plaintiff alleges that “Defendants sell XRP wholesale to larger investors and also sell significant
`quantities of XRP directly to the general public on cryptocurrency exchanges.” FAC ¶ 30. Specifically,
`he alleges that XRP can be purchased or traded on more than 50 third-party virtual currency exchanges
`worldwide. Id. ¶ 47.4 These exchanges are secondary markets, where XRP can be sold not only by
`Defendants, but also by other XRP holders who collectively own billions of XRP, id. ¶ 26, “thousands”
`of whom Plaintiff includes as putative class members who have purchased XRP, id. ¶¶ 166-67. The global
`XRP market is massive, with over $500 billion in trading over the last two years.5
`Plaintiff, “a resident of St. Petersburg, Florida,” claims to have bought and sold approximately
`130,000 XRP between January 1 and 17, 2018, using other cryptocurrency holdings to fund his purchases.
`FAC ¶ 13.6 He does not allege which exchanges he used, nor does he allege that he purchased XRP from
`any particular Defendant. Id. Putting aside that Plaintiff bought and sold XRP (often times for other
`digital currencies) in about a two-week period, he alleges, without specificity, that he was “motivated” to
`purchase XRP due to “the promotional activities of Defendants described herein” and that he “saw and
`relied on Defendants’ repeated representations that adoption of XRP by financial institutions and banks
`would drive demand for XRP.” Id.
`PROCEDURAL HISTORY
`IV.
`Plaintiff initially brought seven claims against Defendants. These included claims for the alleged
`unregistered offer and sale of securities in violation of the federal Securities Act and California securities
`law, Cal. Corp. Code §§ 25110, 25503, 25504. Plaintiff also brought the Fraud Claims, which were
`predicated on various alleged statements by Defendants that Plaintiff claimed were false and misleading.
`Defendants moved to dismiss all of Plaintiff’s claims. Dkt. 70. The Court, granting in part and
`denying in part Defendants’ motion, dismissed the Fraud Claims with leave to amend because, among
`
`4 As of the filing of this Motion, XRP “is now listed on over 130 exchanges worldwide.” Q2 2019
`XRP Markets Report, https://www.ripple.com/insights/q2-2019-xrp-markets-report/ (cited in FAC ¶ 31 &
`n.11).
`
`5 See “Total XRP volume (dollar in billions)” in the XRP Markets Reports cited in FAC ¶¶ 31–39
`& nn.11-19.
`6 Plaintiff’s Certification in connection with his motion to be appointed lead plaintiff in this action
`indicates that his short-term buying and selling of XRP in fact began on January 3, 2018 and that he
`continued to buy XRP after he started selling it, suggesting an effort to make a quick profit. Dkt. 45-1 at
`6–8.
`
`3
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`other reasons, Plaintiff failed to comply with Federal Rule of Civil Procedure 9(b). Dkt. 85 at 40. In the
`FAC, Plaintiff attempts, but fails, to adequately replead his dismissed Fraud Claims to comply with Rule
`9(b). FAC ¶¶ 197-206, 214-219, 220-230.
`STANDARD OF REVIEW
`V.
`In its Order on the initial motion to dismiss, the Court correctly held that Plaintiff’s Fraud Claims
`were subject to Rule 9(b)’s heightened pleading requirement. Dkt. 85 at 32, 39. Nothing has changed,
`and Rule 9(b) continues to apply.
`Rule 9(b) requires plaintiffs alleging fraud to “state with particularity the circumstances
`constituting fraud[.]” Fed. R. Civ. P. 9(b). Under Rule 9(b), allegations of fraud must be “specific enough
`to give defendants notice of the particular misconduct.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,
`1106 (9th Cir. 2003) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). Thus “the
`pleading must identify the who, what, when, where, and how of the misconduct charged, as well as what
`is false or misleading about the purportedly fraudulent statement, and why it is false.” Depot, Inc. v.
`Caring for Montanans, Inc., 915 F.3d 643, 668 (9th Cir. 2019) (quoting Salameh v. Tarsadia Hotel, 726
`F.3d 1124, 1133 (9th Cir. 2013)) (internal quotation marks omitted).
`The requirement to plead falsity is a critical component of Rule 9(b). A plaintiff who successfully
`identifies the “who, what, when, where, and how” of a statement, without more, has not satisfied Rule
`9(b). “A plaintiff must set forth more than the neutral facts necessary to identify the transaction.” Vess,
`317 F.3d at 1106 (quoting In re GlenFed Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994)) (emphasis in
`original). To plead fraud with particularity, then, “a complaint must ‘set forth an explanation as to why
`the statement or omission complained of was false and misleading.’” Mostowfi v. i2 Telecom Intern., Inc.,
`269 Fed. App’x 621, 624 (9th Cir. 2008) (quoting GlenFed, 42 F.3d at 1548).
`Where a plaintiff fails to explain how and why an alleged statement is false, the averments of fraud
`are insufficiently pled and must be disregarded. See Vess, 317 F.3d at 1107. Any claims that depend on
`such inadequate allegations fail and must be dismissed under Rule 12(b)(6). Id. (citations omitted).
`VI. THE FRAUD CLAIMS STILL DO NOT SATISFY RULE 9(b)
`Plaintiff’s FAC identifies the allegations that purport to contain false statements. FAC ¶¶ 202,
`218, 225 (citing FAC ¶¶ 41-42, 47-48, 51-53, 56-57, 64-75). Each of Plaintiff’s Fraud Claims are
`
`4
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
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`predicated on this same set of statements. But these alleged misrepresentations fail to satisfy Rule 9(b)
`because Plaintiff does not (and cannot) explain how and why these statements are false. Depot, Inc., 915
`F.3d at 668. The alleged misrepresentations thus do not satisfy Rule 9(b) and Plaintiff’s Fraud Claims
`should be dismissed. Vess, 317 F.3d at 1107.
`We consider each category of statements in turn.
`Statements Concerning XRP’s Utility
`A.
`Plaintiff alleges that Ripple and Mr. Garlinghouse falsely claimed XRP has a utilitarian purpose.
`In support of this claim, Plaintiff points to several alleged statements wherein Mr. Garlinghouse explains
`or references XRP’s utility, as well as a statement allegedly made by another Ripple employee that sets
`forth the uses for which XRP was designed. FAC ¶¶ 41-42.
`To begin, several (if not all) of these allegations relate to non-actionable statements of opinion.
`See Info. Control Corp. v. Genesis One Computer Corp., 611 F.2d 781, 783 (9th Cir. 1980) (holding that
`under California law “[s]tatements of opinion are not actionable”); ZL Tech., Inc. v. Gartner, Inc., 709 F.
`Supp. 2d 789, 795 (N.D. Cal. 2010) (“An expression of pure opinion is protected by the First Amendment
`and may not form the basis of a civil lawsuit.”). For example, Plaintiff cites an alleged statement wherein
`Mr. Garlinghouse says, “I think if you drive real utility, yes there’s going to be demand for that.” Id. ¶ 41
`(emphasis added). But such predictive statements about what Mr. Garlinghouse believes will be true in
`the future are non-actionable statements of subjective belief that cannot be false. See Cansino v. Bank of
`Am., 224 Cal. App. 4th 1462, 1469 (2014) (“Statements or predictions regarding future events are deemed
`to be mere opinions which are not actionable.”); Salstein v. Ha-Lo Indus., Inc., 82 F. Supp. 2d 1080, 1086
`(N.D. Cal. 1999) (“In general, ‘predictions as to future events, or statements as to future action by some
`third party, are deemed opinions, and are not actionable fraud.’”).
`These allegations also fail because Plaintiff does not allege how or why these representations
`regarding utility are false or misleading. Tellingly, Plaintiff fails to allege that XRP offers no utility to
`financial entities and others involved in the settlement of cross-border payments. Neither does he go
`further, as Rule 9(b) requires, to explain why XRP has no such utility. This is because he cannot do so, a
`fact confirmed in May 2020 by the Bureau of Consumer Financial Protection, which explained that Ripple
`“offer[s] both a payments messaging platform to support cross-border money transfers as well as a virtual
`
`5
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
`
`

`

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`currency, XRP, which can be used to effect settlement of those transfers.” Pritt Decl., Ex. A at 34880.
`Furthermore, the FAC expressly contradicts Plaintiff’s claim that these statements are false by
`acknowledging that Ripple’s “long-term goal is, and always has been, usage of XRP as a liquidity
`solution,” and that Ripple has allegedly entered into partnerships to further this goal, some of which
`involve the use of XRP by financial institutions. Id. ¶¶ 107-10 (“In January 2018, Ripple touted ‘a
`partnership with MoneyGram—one of the world’s largest money transfer companies—to use xRapid and
`XRP for near real-time cross-border payments. In addition, there are a number of other xRapid deals at
`various stages of completion in the pipeline.’”). In fact, Plaintiff relies on these allegations in support of
`its argument that XRP is a security. Id. Plaintiff’s own allegations thus concede that XRP was intended
`to have, and actually has, utility (Plaintiff’s conclusory labels, id. ¶ 43, notwithstanding).
`While Plaintiff’s FAC added a new alleged misrepresentation, id. ¶ 42, this does not rectify the
`deficiency, as this representation is likewise contradicted by other allegations in the FAC. Specifically,
`Plaintiff alleges that in a submission to a Conference of Bank Supervisors, Ripple wrote that “it holds a
`substantial amount of XRP, which it sells from time to time, to financial institutions and entities seeking
`to be market makers. Through these sales, Ripple Labs is able to monetize these assets to fund its
`operations, specifically the development and adoption of the protocol.” Id. Yet, rather than allege how
`or why this representation is false, Plaintiff instead relies on it to support his securities claims. Id. ¶¶ 143-
`45, 151-52 (citing Ripple’s XRP holdings and sales used to fund its business as evidence that XRP is a
`security).
`Despite these inherent contradictions, Plaintiff attempts to muddy the waters by suggesting that
`Ripple’s statements about XRP’s utility are inconsistent with Ripple’s XRP holdings or with some
`individuals’ buying of XRP as an investment. Id. ¶ 43. But the fact that Ripple holds XRP does not mean
`that XRP cannot have utility. For example, the FAC alleges that Ripple sells the XRP it holds to financial
`institutions, id. ¶ 42, who then use XRP “as a bridge” to “maximize[] currency liquidity and geographic
`reach of payments in an efficient way,” Pritt Decl., Ex. B at 16 (Ripple’s submission to the Conference of
`State Bank Supervisors cited at FAC ¶ 43). Nor is XRP’s utility inconsistent with the allegation that some
`individuals may purchase XRP “for investment purpose[s].” FAC ¶ 43. Even if true, that allegation does
`not mean that XRP cannot also have a utilitarian function.
`
`6
`MOTION TO DISMISS CONSOLIDATED FIRST AMENDED COMPLAINT
`CASE NO. 18-cv-06753-PJH
`
`

`

`Case 4:18-cv-06753-PJH Document 102 Filed 06/08/20 Page 13 of 22
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`Plaintiff’s related allegations about a December 2017 tweet that linked to a news article discussing
`XRP’s utility, id. ¶¶ 47-48, fail for the same reasons. The article at issue allegedly states that “XRP’s
`long-term value is determined by its utility—including its ability to help financial institutions source
`liquidity for payments into and out of emerging markets.” Id. ¶ 47. The Court previously rejected this
`allegation because Plaintiff failed to explain how or why the statement is false. Dkt. 85 at 33. Plaintiff
`now alleges that the tweet and the article were false when made because “demand for XRP from financial
`institutions did not represent a significant portion of the demand for XRP[.]” FAC ¶ 48.
`This new allegation does not establish that the tweet was false and does not cure the defect
`previously identified by the Court. First, the tweet is a forward-looking statement about XRP’s long term
`value. See Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells, 86 Cal. App. 4th 303, 309-10 (2000) (“It
`is hornbook law that an actionable misrepresentation must be made about past or existing facts; statements
`regarding future events are merely deemed opinions.”); In re iPass, Inc. Sec. Litig., No. C05-00228 MHP,
`2006 WL 496046, at *4 (N.D. Cal. Feb. 28, 2006) (holding that “forward-looking or generalized
`statements of optimism . . . are not capable of objective verification” and thus “cannot serve as actionable
`material statements of fact under federal securities laws.”) (internal quotations and citations omitted). A
`projection about the long-term drivers of XRP’s value is not “capable of