Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 1 of 22
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`VLADI ZAKINOV, et al.,
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`Plaintiffs,
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`v.
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`RIPPLE LABS, INC., et al.,
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`Defendants.
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`Case No. 18-cv-06753-PJH
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`ORDER GRANTING IN PART AND
`DENYING IN PART MOTION TO
`DISMISS CONSOLIDATED FIRST
`AMENDED COMPLAINT
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`Re: Dkt. No. 102, 103, 109
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`Before the court is Defendant Ripple Labs, Inc.’s (“Ripple”), defendant XRP II,
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`LLC’s (“XRP II”), and Ripple’s Chief Executive Officer, Bradley Garlinghouse
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`(“Garlinghouse”) (collectively, “defendants”) motion to dismiss plaintiff Bradley Sostack’s
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`(“plaintiff”) consolidated first amended complaint. Dkt. 102. Having read the parties’
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`papers and carefully considered their argument and the relevant legal authority, and good
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`cause appearing, the court hereby GRANTS in part and DENIES in part defendants’
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`motion to dismiss.
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`BACKGROUND
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`This order addresses defendants’ second motion to dismiss in a consolidated
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`putative class action (“In re Ripple”) that arises out of the creation, dispersal, circulation,
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`and sale of “XRP,” which is a sort of “cryptocurrency.” This action’s procedural posture is
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`nuanced and, except as noted below, does not bear on the instant motion.
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`On February 26, 2020, the court granted in part and denied in part defendants’ first
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`motion to dismiss plaintiff’s consolidated class action complaint (the “prior order”). Dkt.
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`85. The court denied that motion with respect to plaintiff’s claims for defendants’ alleged
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`offer or sale of unregistered securities in violation of federal and California state law. Id.
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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 2 of 22
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`at 40. However, the court granted that motion with respect to the following claims alleged
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`in plaintiff’s initial complaint:
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`• Violation of California Corporations Code § 25501 against Ripple and XRP II, as
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`well as a parallel material assistance claim under § 25504.1 against Ripple and
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`Garlinghouse, for misleading statements made in connection with the offer or sale
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`of securities as prohibited by § 25401 (the “fourth cause of action”).
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`• Violation of California Business & Professions Code § 17500 against defendants
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`for misleading advertisements concerning XRP (the “sixth cause of action”).
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`• Violation of California Business & Professions Code § 17200 against defendants
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`for their unregistered offer or sale of securities in violation of federal and state law,
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`false advertising practices, misleading statements, and offense to established
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`public policy (the “seventh cause of action”).
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`The court dismissed these three causes of action (collectively, the “fraud claims”)
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`because plaintiff failed to satisfy Rule 9(b)’s heightened pleading requirements as they
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`pertain to the alleged misstatements underlying such claims. Dkt. 85 at 32-36. At core,
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`the court reasoned that plaintiff failed to explain how and why the subject statements
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`were false. Id. While the court generally dismissed the fraud claims without prejudice, it
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`dismissed the sixth and seventh of causes of action (jointly, the “Business & Professions
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`Code fraud claims”) with prejudice to the extent they rested on the theory that XRP was a
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`security. Id. at 37-40. The court based that determination on established state decisional
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`law finding that claims brought under those sections may not extend to actions that relate
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`to securities transactions. Id. Having drawn that distinction, the court nonetheless
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`permitted plaintiff an opportunity to amend his pleadings to comply with Rule 9(b)’s
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`requirements for claims brought under those sections, provided that he do so under the
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`alternative theory that XRP is not a security. Id. at 40.
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`On March 25, 2020, plaintiff filed his consolidated first amended complaint. Dkt.
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`87 (“CFAC”). Aside from further detailing the purported misstatements underlying the
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`fraud claims, the CFAC’s factual allegations are materially similar to those alleged in
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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 3 of 22
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`plaintiff’s initial complaint. Dkt. 87-1 (redline demarcating pleading changes). In his
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`CFAC, plaintiff identifies 17 alleged misstatements to substantiate his fraud claims.
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`Those statements fall into one of the following four categories of purported fraud:
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`• Defendants misrepresented XRP’s “utility.” CFAC ¶¶ 41-42, 47-48.
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`• Defendants conflated the adoption and use of their enterprise solutions software
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`with that of XRP. Id. ¶¶ 64-75.
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`• Ripple misstated its XRP sales activity during the December 2017 through January
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`2018 period. Id. ¶¶ 56-57.
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`• Garlinghouse misrepresented the scope and character of his XRP holdings. Id. ¶¶
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`51-53.
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`The particular wording of all 17 alleged misstatements is critical to decide this
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`motion. Rather than listing them here, the court will detail each statement in its analysis.
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`DISCUSSION
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`A.
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`Legal Standard
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`1.
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`Rule 12(b)(6)
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`A motion to dismiss under Rule 12(b)(6) tests for the legal sufficiency of the claims
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`alleged in the complaint. Ileto v. Glock, 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Rule 8
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`requires that a complaint include a “short and plain statement of the claim showing that
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`the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Under Rule 12(b)(6), dismissal “is
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`proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege
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`sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953,
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`959 (9th Cir. 2013). While the court is to accept as true all the factual allegations in the
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`complaint, legally conclusory statements, not supported by actual factual allegations,
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`need not be accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The complaint
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`must proffer sufficient facts to state a claim for relief that is plausible on its face. Bell
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`Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 558-59 (2007).
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`As a general matter, the court should limit its Rule 12(b)(6) analysis to the
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`contents of the complaint, although it may consider documents “whose contents are
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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 4 of 22
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`alleged in a complaint and whose authenticity no party questions, but which are not
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`physically attached to the plaintiff's pleading.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th
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`Cir. 2005); Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007) (“a court can consider a
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`document on which the complaint relies if the document is central to the plaintiff's claim,
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`and no party questions the authenticity of the document”). The court may also consider
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`matters that are properly the subject of judicial notice, Lee v. City of L.A., 250 F.3d 668,
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`688–89 (9th Cir. 2001), exhibits attached to the complaint, Hal Roach Studios, Inc. v.
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`Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), and documents
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`referenced extensively in the complaint and documents that form the basis of the
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`plaintiff's claims, No. 84 Emp'r-Teamster Jt. Counsel Pension Tr. Fund v. Am. W. Holding
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`Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003).
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`Lastly, a district court “should grant [a] plaintiff leave to amend if the complaint can
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`possibly be cured by additional factual allegations,” however, dismissal without leave “is
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`proper if it is clear that the complaint could not be saved by amendment.” Somers, 729
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`F.3d at 960. Relevant here, the Ninth Circuit has recognized that in circumstances
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`“where plaintiff has previously amended the complaint,” the district court’s discretion to
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`deny further leave “is particularly broad.” Metzler Inv. GMBH v. Corinthian Colleges, Inc.,
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`540 F.3d 1049, 1072 (9th Cir. 2008).
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`2.
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`Rule 9(b)
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`For actions alleging fraud, “a party must state with particularity the circumstances
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`constituting fraud or mistake.” Fed. R. Civ. Pro. 9(b). To satisfy Rule 9(b), a plaintiff
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`must allege “the ‘time, place, and specific content of the false representations as well as
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`the identities of the parties to the misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d
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`756, 764 (9th Cir. 2007). “Averments of fraud must be accompanied by ‘the who, what,
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`when, where, and how’ of the misconduct charged,” and “a plaintiff must set forth more
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`than the neutral facts necessary to identify the transaction. The plaintiff must set forth
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`what is false or misleading about a statement, and why it is false.” Vess v. Ciba-Geigy
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`Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (emphasis in the original). Plaintiff’s
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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 5 of 22
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`allegations of fraud “must be specific enough to give defendants notice of the particular
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`misconduct which is alleged to constitute the fraud charged so that they can defend
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`against the charge and not just deny that they have done anything wrong.” Swartz, 476
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`F.3d at 764.
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`B.
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`Analysis
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`In their motion, defendants move to dismiss only the fraud claims, which, as
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`previously noted, comprise the CFAC’s fourth, sixth, and seventh causes of action.
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`Defendants principally argue that plaintiff again failed to show how or why each of the
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`alleged misstatements is false. Dkt. 102 at 10-11. The court analyzes each alleged
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`misstatement per category of fraud below.
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`1.
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`Statements Concerning XRP’s Utility
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`To substantiate the first basis for his fraud claims, plaintiff relies on five statements
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`by defendants concerning XRP’s utility. Plaintiff’s theory of falsity for all five statements
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`is the same. It rests on only two allegations, paragraph 43 and paragraph 48. In
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`paragraph 43, plaintiff alleges that the subject statements are false because, when made,
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`approximately 60 percent of XRP was owned by Ripple and the “vast majority, if not all”
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`of the remaining forty percent of XRP was “not used for bridging international
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`transactions but for investment purpose.” In paragraph 48, plaintiff adds that “demand for
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`XRP from financial institutions did not represent a significant portion of the demand for
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`XRP and little, if any, XRP was used to ‘help financial institutions source liquidity for
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`payments into and out of emerging markets.’”
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`It is important to clarify that this theory does not assert that the subject statements
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`are false because XRP could not, theoretically, serve a useful purpose (e.g., as a
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`surrogate for traditional currency). Instead, as alleged in paragraphs 43 and 48, plaintiff
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`asserts that the subject statements are false because they impart the misleading
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`impression that XRP was, in practice, being widely used for such purposes. Plaintiff
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`doubles down on that theory in his opposition brief. Dkt. 105 at 9 (“Thus, Ripple touted
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`XRP’s purported utility . . . However, as Plaintiff alleges, XRP has no such utility. . . .
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`Ripple also claimed that XRP’s utility stemmed from its ability to help financial institutions
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`source liquidity, but Plaintiff alleges that XRP was seldom, if ever, used to source
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`liquidity.”). To be clear, then, the issue here is whether plaintiff adequately alleged why
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`each of the subject statements by defendants concerning XRP’s utility in practice was, in
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`fact, false.1 The court analyzes that theory as it concerns each statement below.
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`First – In an October 23, 2017 interview published by a third-party, Garlinghouse
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`was asked “[w]hy do banks need XRP?” CFAC ¶ 41. In response, he stated that “[i]t’s
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`about liquidity. If you have a utility token like XRP that has a real value proposition.” Id.
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`Plaintiff failed to explain why any part of this statement is false. With respect to
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`the first part of this statement, plaintiff’s theory does not contest that XRP could help
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`banks source liquidity. It simply explains that, in fact, XRP was not then-presently
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`serving that function. The second part of this statement is phrased in the conditional
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`tense. It sets forth an if-then proposition, which, plainly, falls short of saying that XRP is,
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`in practice, solving liquidity problems.
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`Second – In an interview with a third-party and subsequently retweeted by Ripple
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`on December 14, 2017, Garlinghouse stated that “[i]f they [digital tokens] are solving a
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`real problem, and that problem has scale, and that problem, you know there is real value
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`there, then there will be demand for the tokens and the price of the tokens will go up. For
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`XRP we have seen because it’s required, it’s something that can really reduce the
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`friction, and we’re talking about a multi-trillion-dollar problem in how cross-border
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`payments flow. And so, I think if you drive real utility, yes there’s going to be demand for
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`that.” Id.
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`1 The court DENIES defendants’ request that it take judicial notice of the Bureau of
`Consumer Financial Protection’s (“BCFP”) June 5, 2020 rule titled “Remittance Transfers
`Under Electronic Fund Transfer Act.” Dkt. 103-2. Defendants proffer that document for
`the fact that XRP “can be used to effect settlement of [cross-border] transfers.” Dkt. 102
`at 11-12 (emphasis added). Given that plaintiff does not contest such theoretical use, the
`rule’s purported fact is irrelevant to this motion. While plaintiff does not oppose
`defendants’ remaining three requests, Dkt. 104 at 2, the court need not consider their
`documents (Dkts. 103-3, 103-4, 103-5) to reach its determination on this motion. Thus,
`the court DENIES defendants’ request as it pertains to those documents as well.
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`Plaintiff failed to explain why this statement is false. The first part of this statement
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`is phrased in the conditional tense and, again, plaintiff’s theory of falsity does not
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`challenge the veracity of its if-then proposition.
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`Contrary to plaintiff’s mischaracterization, the second part of this statement does
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`not assert that Garlinghouse stated that “he had seen that XRP is required to solve a real
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`multi-trillion-dollar problem.” Dkt. 105 at 10. Rather, this part asserts that defendants
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`“have seen” that XRP is “something that can really reduce the friction” for cross-border
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`payments. CFAC ¶ 41. By plaintiff’s own allegation, that assertion is not false. Id. ¶ 43
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`(implicitly acknowledging that some XRP has been “used for bridging international
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`transactions”). Regardless, any assertion that XRP is “required” (albeit for cross-border
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`payments or otherwise) is plainly puffery: the world (and global commerce) has operated
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`without XRP for centuries.2
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`The third part of this statement is also phrased in the conditional tense and, yet
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`again, plaintiff fails to challenge the veracity of the third part’s proposition that the
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`demand for XRP will increase as a function of XRP’s actual usefulness. Moreover,
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`Garlinghouse’s “I think” qualifier turns this part into an opinion, which, generally, is not
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`actionable.
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`To be sure, the court understands plaintiff’s repeated fallback position that any
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`“opinions” by defendants are nonetheless actionable because they possess superior
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`knowledge concerning the content of the statements at hand. To support that position,
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`plaintiff rests heavily on the California Court of Appeals for the First District’s decision in
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`Public Employees' Retirement System v. Moody's Inv'rs Serv., Inc., 226 Cal. App. 4th 643
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`(2014). In it, then-Justice Jenkins recognized the following under California law:
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`“Under certain circumstances, expressions of professional
`opinion are treated as representations of fact,” such as “when
`a party possesses or holds itself out as possessing superior
`knowledge or special information or expertise regarding the
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`2 Since the court need not consider the full December 14, 2017 interview to reach this
`determination, it will not rule on plaintiff’s objection to defendants’ proffering that interview
`as part of their reply. Dkt. 109.
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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 8 of 22
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`subject matter and a plaintiff is so situated that it may
`reasonably rely on such supposed knowledge, information, or
`expertise, the defendant's representation may be treated as
`one of material fact.” Id. at 662.
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`However, plaintiff’s reliance on Public Employees' Retirement System is
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`misplaced. In that case, the court applied the special knowledge exception to credit
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`ratings for certain special investment vehicles (“SIVs”) implicated in the 2008 financial
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`collapse only after plaintiff proffered “several declarations” to “support its theory that
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`ratings are more akin to deliberate affirmations of fact based on special knowledge or
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`expertise than mere opinions or predications.” Id. As thoroughly detailed in that court’s
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`decision, those declarations revealed an exceptionally complex rating process in an
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`industry “shrouded in secrecy,” id. at 662-63, thus justifying finding that the defendant
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`rating agencies “published ratings from a position of superior knowledge, information, and
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`expertise regarding the SIVs’ composition, underlying structure, and function that was not
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`generally available in the market,” id. at 664.
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`Plaintiff, on the other hand, proffers a “see” citation to this decision and, based on
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`it, asserts that the third part of this statement qualifies as an actionable opinion because
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`defendants “ha[ve] special knowledge concerning XRP’s true utility.” Dkt. 105 at 11.
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`Such a lackadaisical showing, repeated throughout the CFAC and opposition brief as it
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`pertains to various other alleged misstatements, is insufficient to invoke the superior
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`knowledge exception. Moreover, even on the merits, it does not appear that the opinion
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`portion of this statement was based on non-public information or special expertise. As
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`defendants point out, Dkt. 106 at 10 n.5, any intelligent observer could reason that a
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`fungible device capable of crossing borders quickly and securely as a medium of
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`exchange might serve a valuable function for those engaged in international transactions.
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`Third – In a December 27, 2017 interview with a third-party, Garlinghouse stated
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`that “we use XRP to settle liquidity between banks.” Id.
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`Again, plaintiff’s own allegations undermine his argument that this statement is
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`false. CFAC ¶ 48 (“demand for XRP from financial institutions did not represent a
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`significant portion of the demand for XRP and little, if any, XRP was used to ‘help
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`financial institutions source liquidity for payments . . . ’”) (emphasis added). Indeed,
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`paragraph 48 substantiates Garlinghouse’s assertion concerning XRP’s use because it
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`implicitly acknowledges that at least some XRP had then been used for liquidity. If
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`plaintiff meant to allege that no XRP has ever been used for liquidity, he could have done
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`so. He did not, and the court will not read that allegation into his pleadings.
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`Fourth – In a February 14, 2015 submission to the Conference of State Bank
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`Supervisors subsequently reposted on its website, Ripple’s Chief Compliance Officer,
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`Karen Gifford (“Gifford”) stated in relevant part that XRP “is designed to be used directly
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`by (1) banks and financial services business, (2) payment networks, and (3) liquidity
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`providers.” Id. ¶ 42.
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`As an initial matter, plaintiff distorts Gifford’s statement when arguing its falsity.
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`Dkt. 105 at 10 (“Ms. Gifford explained to the Conference of State Bank Supervisors
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`XRP’s present design and use case . . . and how XRP is designed and used is objectively
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`verifiable.”). Plainly, Gifford’s statement does not address the status of XRP’s use by
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`third-parties. Instead, this statement concerns the persons by whom XRP is designed to
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`be used. Thus, plaintiff’s theory of falsity (i.e., XRP, in practice, was not being widely
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`used) says nothing about the veracity of defendants’ assertion that they developed XRP
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`for use by banks and other financial services providers.
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`Fifth – On December 21, 2017, Ripple tweeted a link to an article that stated in
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`relevant part that “XRP’s long-term value is determined by its utility—including its ability
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`to help financial institutions source liquidity for payments into and out of emerging
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`markets.” Id. ¶ 47.
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` Again, plaintiff’s theory of falsity does not explain why this statement is false. In
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`laymen’s terms, this statement stands for the proposition that the long-term value of XRP
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`depends on its use. The allegations that XRP was not being used in practice does not
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`establish that the subject proposition is false. Plaintiff’s attempt to distort this statement,
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`Dkt. 105 at 10 (“Ripple’s tweeted article claimed that XRP has utility in helping financial
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`institutions source liquidity . . . which is verifiable”), does not salvage this shortcoming.
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`9
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`Northern District of California
`United States District Court
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`

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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 10 of 22
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`In short, the court concludes that plaintiff failed to adequately allege why any
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`statement by defendants concerning XRP’s utility is false. Accordingly, these statements
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`fail Rule 9(b)’s specificity requirements and may not serve as a basis for the fraud claims.
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`2.
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`Statements Concerning Ripple’s Enterprise Solutions Software and Its
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`Relationship to XRP
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`To substantiate the second basis for his fraud claims, plaintiff relies on ten
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`statements by defendants concerning the adoption and use of Ripple’s enterprise
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`solutions software and XRP. Plaintiff asserts that the first and second statements as well
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`as the ninth and tenth should, respectively, be read together. Plaintiff argues that the
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`remaining six statements each serve as an independent basis for the fraud claims. While
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`plaintiff proffers various specific arguments to show why each statement is false or
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`misleading, his alleged theory of falsity for all ten statements is that they “conflate
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`adoption of Ripple Enterprise Solutions with adoption and use of XRP” and, relatedly,
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`“create an impression that adoption of Ripple Enterprise Solutions by financial institutions
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`will drive demand for XRP and thereby allow investors to profit by holding XRP.” Id. ¶ 76.
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`The court details and analyzes each statement below.
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`First – On March 20, 2017, Ripple published a previously tweeted article written
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`by a third-party concerning the adoption of Ripple’s enterprise solutions software. CFAC
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`¶ 64. In its tweet, Ripple stated that it “is the only company in this space with real
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`customers who are really in production.” Id. Plaintiff argues that this tweet was
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`misleading “because it failed to disclose that the customers referenced were not XRP
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`customers but rather enterprise solutions customers.” Dkt. 105 at 15.
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`Second – On March 24, 2017, Ripple published a tweet stating that “[t]he price of
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`#XRP continues to surge showing that people are looking for #bitcoin alternatives.” Id. ¶
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`65. Plaintiff proffers this statement to show that “Ripple reinforced investors’ false
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`association of XRP’s value with adoption of Ripple’s enterprise solutions.” Dkt. 105 at 15.
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`Plaintiff failed to show how these statements conflate the software and XRP and
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`why, in fact, they are false. The first statement makes no explicit reference to XRP. The
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`10
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`Northern District of California
`United States District Court
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`

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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 11 of 22
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`court also does not see a basis to infer that its reference to “this space” implies the
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`cryptocurrency market or its use of the unqualified term “customers” necessarily means
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`XRP purchasers. Both terms are vague and, when construed with the referenced article,
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`suggests the market for payment software (i.e., Ripple’s enterprise solutions software).
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`Indeed, by plaintiff’s own allegation, that article concerned the “adoption of Ripple
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`Enterprise Solutions.” CFAC ¶ 64.
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`The second statement does not remedy those shortcomings. While it concerns
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`XRP, it says nothing about the software. To the extent plaintiff invites the court to read
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`the first and second statements in combination, the court declines. Plaintiff failed to
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`articulate any specific reason (or authority) to support such a construction and these
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`statements concern distinct topics published days apart. Accordingly, these statements
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`may not serve as bases for the fraud claims.3
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`Third – On April 26, 2017, Ripple published a tweet linking to an article on its
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`website stating that “#Ripple welcomes 10 additional customers to our #blockchain
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`#payments network.” CFAC ¶ 66. Plaintiff argues that this tweet was misleading
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`“because it did not specify that the additional customers referenced were xCurrent
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`customers—not XRP customers. Nor did the article specify that the additional customers
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`were xCurrent customers rather than XRP customers.” Dkt. 105 at 16.
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`The court disagrees with plaintiff’s explanation for how this statement is
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`misleading. Again, this statement does not make any explicit reference to XRP and its
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`use of the terms “#blockchain” and “#payments network” is vague. In a vacuum, the
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`“#blockchain” reference might suggest that the statement implicitly referenced XRP.
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`3 Throughout their briefing, defendants repeatedly argue that plaintiff does not assert that
`the content of the statements alleged in this category are, in fact, false. See, e.g., Dkt.
`106 at 14 (“Plaintiff likewise fails to allege or explain why the subsequent March 24 tweet
`is false: nowhere does he allege that the price of XRP was not surging on that date or
`that prospective customers were not looking for alternatives to bitcoin.”). Of course, as
`shown at CFAC ¶ 76, plaintiff’s theory of falsity is not that the content of the purported
`misstatement is itself inaccurate. Instead, his theory is that defendants were engaged in
`a sort of shell game when publicly referring to the software and XRP. Accordingly, the
`court disregards this entire line of argument.
`11
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`Northern District of California
`United States District Court
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`

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`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 12 of 22
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`However, the reasonableness of any such suggestion is belied by plaintiff’s immediately
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`preceding allegation, which shows that defendants previously used “#XRP” in their tweets
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`when referring to the cryptocurrency. CFAC ¶ 65 (“The price of XRP increased rapidly
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`following this tweet and on March 24, 2017, Ripple tweeted: ‘The price of #XRP
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`continues to surge showing that people are looking for #bitcoin alternatives.’”) (emphasis
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`added); see also id. ¶¶ 69, 91, 119-20 (post-April 26, 2017 “#XRP” references).
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`Moreover, as plaintiff himself cedes, the tweeted article refers to “Ripple’s
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`enterprise blockchain solution” mid-way through the article. Dkt. 105 at 16 (emphasis
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`added). Such a reference, which a reasonable investor or consumer would identify when
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`reading the referenced article, further undermines plaintiff’s assertion that this statement
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`is misleading. Accordingly, it may not serve as a basis for the fraud claims.
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`Fourth – On May 3, 2017, as the price of XRP had continued to rise, Ripple
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`published a tweet stating that “#Ripple adoption is sparking interest in XRP ‘which has
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`had an impressive rally in the last two months’ via @Nasdaq.” Id. ¶ 67. Plaintiff argues
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`that this tweet “perpetuated the false association” between Ripple’s enterprise solutions
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`and XRP, Dkt. 105 at 16, because “[b]y misleading investors into believing that XRP’s
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`use rose with each successive customer adopting Ripple’s enterprise solution,
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`[d]efendants inflated the price of XRP . . .” id. at 16 n.9.
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`The court disagrees. Again, the statement’s reference to “interest” is vague and
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`does not necessarily mean the increased adoption or use of XRP. As defendants note,
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`that term could refer to “any number of things, including press coverage, new customers,
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`or the attention of crypto enthusiasts.” Dkt. 106 at 15. The fact that a third-party
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`(Nasdaq) reported on XRP as a result of the “Ripple Network’s adoption by a large
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`number of financial institutions” (Dkt. 106-1 at 6) demonstrates that point.4 Accordingly,
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`4 The court OVERRULES plaintiff’s objection to the court’s consideration of the above-
`referenced Nasdaq article. Dkt. 109. Paragraph 67 discusses Ripple’s May 3, 2017
`tweet. That paragraph’s corresponding footnote details the link to the May 3, 2017 tweet.
`CFAC ¶ 67 n.46. That tweet includes a link to the Nasdaq article immediately below the
`tweet’s heading. Thus, the CFAC incorporates the subject article by reference.
`Additionally, defendants’ arguments concerning this article in their reply is well-within the
`12
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`Northern District of California
`United States District Court
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`

`

`Case 4:18-cv-06753-PJH Document 115 Filed 10/02/20 Page 13 of 22
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`this statement may not serve as a basis for the fraud claims.5
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`Fifth – On May 16, 2017, Ripple published a tweet stating that “[t]he appeal that
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`Ripple has towards traditional financial institutions is a big advantage it has over Bitcoin.”
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`Id. ¶ 68. Plaintiff explains that “[b]y comparing Ripple to Bitcoin (a cryptocurrency),
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`Ripple implied that its own cryptocurrency (XRP) was appealing to traditional financial
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`institutions and therefore being adopted.” Dkt. 105 at 17.
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`This explanation fails to establish the falsity of the subject statement. As used
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`here, the reference to “Ripple” is vague and plaintiff does not show how it compels a
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`comparison between XRP and Bitcoin. Separately, even if such a comparison were
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`necessarily implied, plaintiff fails to proffer any specific reason (or authority) to support
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`the position that the statement’s reference to XRP’s “appeal” amounts to its “adoption.”
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`The reference to “appeal” is vague and could mean numerous things, including, for
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`example, a simple growing sense of curiosity about XRP by banks. Accordingly, this
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`statement may not serve as a basis for the fraud claims.
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`Sixth – On June 29, 2017, Ripple published a t