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Case 4:18-cv-06753-PJH Document 87 Filed 03/25/20 Page 1 of 57
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`James Q. Taylor-Copeland (284743)
`james@taylorcopelandlaw.com
`TAYLOR-COPELAND LAW
`501 W. Broadway, Suite 800
`San Diego, CA 92101
`Telephone: (619) 400-4944
`Facsimile: (619) 566-4341
`
`Marc M. Seltzer (54534)
`mseltzer@susmangodfrey.com
`Steven G. Sklaver (237612)
`ssklaver@susmangodfrey.com
`Oleg Elkhunovich (269238)
`oelkhunovich@susmangodfrey.com
`Meng Xi (280099)
`mxi@susmangodfrey.com
`SUSMAN GODFREY L.L.P.
`1900 Avenue of the Stars, 14th Floor
`Los Angeles, CA 90067
`Telephone: (310) 789-3100
`Facsimile: (310) 789-3150
`
`Counsel for Lead Plaintiff Bradley Sostack
`
`
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`In re RIPPLE LABS INC. LITIGATION,
`____________________________________
`This Document Relates To:
`ALL ACTIONS
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`OAKLAND DIVISION
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`Case No. 4:18-cv-06753-PJH
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`CLASS ACTION
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`CONSOLIDATED FIRST AMENDED
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`COMPLAINT FOR VIOLATIONS OF
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`FEDERAL AND CALIFORNIA LAW
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`JURY TRIAL DEMANDED
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`Case 4:18-cv-06753-PJH Document 87 Filed 03/25/20 Page 2 of 57
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`TABLE OF CONTENTS
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`SUMMARY OF ACTION ...................................................................................................2 
`PARTIES .............................................................................................................................6 
`JURISDICTION AND VENUE ..........................................................................................6 
`SUBSTANTIVE ALLEGATIONS .....................................................................................7 
`A. 
`XRP’s Genesis And Public Offerings ......................................................................7 
`B. 
`Defendants’ Primary Source of Income is the Sales of XRP ...................................8 
`C. 
`Defendants Market XRP to Drive Demand And Increase Price ............................12 
`1. Defendants Blur Differences Between Ripple’s Enterprise Solutions
`and XRP to Further Drive Demand ..............................................................16 
`2.  Defendants Offer to Pay Exchanges to List XRP .........................................22 
`3.  Ripple Publicly Limits the Supply of XRP to Drive Price
`Appreciation ..................................................................................................23 
`4.   Defendants Make False Statements Claiming XRP is Not A Security .........26 
`Development of the XRP Ledger And the Success of XRP Are Dependent
`on Defendants’ Efforts ...........................................................................................26 
`Ripple Updates XRP ..............................................................................................28 
`XRP Is A Security ..................................................................................................32 
`1.  XRP Purchasers Made an Investment of Money in A Common
`Enterprise ......................................................................................................33 
`2.  XRP Investors Had a Reasonable Expectation of Profits .............................34 
`3. 
`The Success of XRP Requires Efforts of Ripple and Others ........................37 
`4.  XRP Is a Security Under California Law .....................................................44 
`CLASS ACTION ALLEGATIONS ..................................................................................45 
`CAUSES OF ACTION ......................................................................................................47 
`PRAYER FOR RELIEF ....................................................................................................54 
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`D. 
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`E. 
`F. 
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`Case 4:18-cv-06753-PJH Document 87 Filed 03/25/20 Page 3 of 57
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`Lead Plaintiff Bradley Sostack (“Lead Plaintiff”), individually and on behalf of all others
`similarly situated, by his undersigned attorneys, alleges the following against Defendants Ripple Labs,
`Inc. (“Ripple” or “Ripple Labs”), its wholly owned subsidiary XRP II, LLC (“XRP II”), and Ripple
`Labs’ CEO Bradley Garlinghouse (collectively, “Defendants”). Lead Plaintiff’s allegations herein are
`based upon personal knowledge as to himself and his own acts, and upon information and belief as to
`all other matters based on the investigation conducted by and through Lead Plaintiff’s attorneys, which
`included, among other things, a review of press releases, media reports, and other publicly disclosed
`reports and information about Defendants. Lead Plaintiff believes that substantial additional
`evidentiary support will exist for the allegations set forth herein, after a reasonable opportunity for
`discovery.
`
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`SUMMARY OF ACTION
`1.
`This is a class action on behalf of all investors who purchased Ripple XRP tokens
`issued and sold by Defendants. It arises out of a scheme by Defendants to raise hundreds of millions
`of dollars through sales of XRP—an unregistered security—to retail investors in violation of the
`registration provisions of federal and state securities laws. Additionally, in order to drive demand for
`and thereby increase profits from the sale of XRP, Defendants have made a litany of false and
`misleading statements regarding XRP in violation of California’s securities laws, and false advertising
`and unfair competition laws.
`2.
`Unlike cryptocurrencies such as Bitcoin and Ethereum, which are mined by those
`validating transactions on their networks, all 100 billion of the XRP in existence were created out of
`thin air by Ripple at its inception in 2013, before any distribution and without functionality except as
`a speculative investment.1 “In other words, unlike some virtual currencies, XRP was fully generated
`prior to its distribution.”2 Twenty billion XRP, or 20 percent of the total XRP supply, were given to
`the individual founders of Ripple, with the remaining 80 billion XRP retained by Ripple.
`
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`1 Ripple was known as OpenCoin, Inc. until September 26, 2013, when it changed its name.
`2 FinCEN Statement of Facts and Violations, https://www.fincen.gov/sites/default/files/shared/
`Ripple_Facts.pdf (last visited Aug. 2, 2019).
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`3.
`Moreover, XRP is not decentralized like Bitcoin. As recently stated by CoinMotion, a
`crypto-token exchange that listed XRP, in a blog post entitled XRP is a Centralized Virtual Currency,
`“the Ripple system appears to be centralized for all practical purposes. It probably lacks many
`interesting technical features that Bitcoin has, such as resistance to censorship.”3
`4.
`Defendants have since earned massive profits by selling off XRP to the general public,
`in numerous offerings, having sold over $1.1 billion in XRP to retail consumers in exchange for legal
`tender or cryptocurrencies (most often Bitcoin and Ethereum). The value of XRP owned by
`Defendants substantially exceeds the value of Ripple’s revenue or cashflow from all other sources.
`Ripple’s dominant value proposition are the XRP tokens it owns and sells. Ripple’s value proposition
`as a company depends upon the promotion of XRP, yet XRP is entirely or essentially pre-functional
`and purchased by investors in anticipation of profit based on the efforts of Ripple.
`5.
`In order to drive demand for XRP, and thereby increase the profits it can derive by
`selling XRP, Ripple has portrayed XRP as a good investment, relayed optimistic price predictions,
`and conflated Ripple’s enterprise business with usage of XRP. Ripple is inextricably linked to the
`promotion of XRP. Ripple lines up crypto-exchanges to list XRP and pays substantial listing fees as
`part of those promotional efforts, and Ripple’s website links to trading markets for XRP, to facilitate
`additional purchases. Ripple also placed a substantial percentage of XRP that it owned into escrow
`and developed a plan as to when XRP should be sold and in what quantities, all to limit selling pressure
`on the market in order to prop-up the price of XRP. For example, in 2014, Ripple publicly stated on
`its www.ripplelabs.com/xrp-distribution/ website that “we will engage in distribution strategies that
`we expect will result in a stable or strengthening XRP exchange rate against other currencies.” (Ripple
`has since deleted that web page, as if that somehow erases history.) Ripple greatly increased these
`efforts to push XRP on the general public in 2017 and 2018. The price of XRP has fallen dramatically
`since early 2018, leaving its investors, including Lead Plaintiff, with substantial financial losses.
`
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`3 XRP is a Centralized Virtual Currency, Coinmotion (Feb. 11, 2019), https://coinmotion.com/
`blog/ripple-is-a-centralized-virtual-currency/.
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`6.
`Defendants also reportedly offered to pay popular U.S.-based cryptocurrency
`exchanges Coinbase, Inc. (“Coinbase”) and Gemini Trust Company, LLC (“Gemini”) to list XRP. In
`or about the fall of 2017, Ripple is reported to have offered Coinbase more than $100 million worth
`of XRP to start letting Coinbase users trade XRP. A Ripple executive is also reported to have asked
`whether a $1 million cash payment could persuade Gemini to list XRP in the third quarter of 2017.
`Although both Gemini and Coinbase declined to pursue these proposals, rumors that XRP would be
`added to Coinbase fueled its price increase in late 2017 and early 2018. Ripple was the source of these
`rumors.
`7.
`Federal securities laws require any security that is offered or sold to be registered with
`the Securities and Exchange Commission (“SEC”). Similarly, the California Corporate Securities Law
`requires that securities offered or sold be either qualified with the Commissioner of Corporations or
`exempted from registration by a specific Rule of the Commissioner or law. These securities laws are
`designed to protect the public by requiring various disclosures so that investors can better understand
`the security that is being offered or sold, as well as risks associated with investment in that security.
`Absent the disclosures required by law about those efforts and the progress and prospects of the
`enterprise, significant informational asymmetries may exist between the management and promoters
`of the enterprise on the one hand, and investors and prospective investors on the other hand. The
`reduction of these information asymmetries through required disclosures protects investors and is one
`of the primary purposes of the securities laws.
`8.
`Under section 2(a)(1) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C.
`§ 77b(a)(1), a “security” is defined to include an “investment contract.” Similarly, section 25019 of
`the California Corporations Code defines a “security” to include an “investment contract.”
`9.
`The SEC has made it clear that digital tokens, such as XRP, often constitute “securities
`and may not be lawfully sold without registration with the SEC or pursuant to an exemption from
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`registration.”4 One of the top financial regulators in President Obama’s administration has likewise
`stated that there is a “strong case” to conclude that “particularly Ripple” has violated securities laws
`by issuing and trading “noncompliant securities.”5
`10.
`The SEC’s Strategic Hub for Innovation and Financial Technology (“FinHub”) has also
`published the Framework for ‘Investment Contract’ Analysis of Digital Assets (“SEC Framework”),
`providing guidance for assessing whether a crypto-token offering is a security under federal law.6 As
`explained in more detail below, applying the analysis in the SEC Framework and applicable precedent,
`the XRP tokens offered and sold by Defendants have all the traditional hallmarks of a security, as
`reflected in SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (“Howey”), and subsequent case law. XRP
`tokens also qualify as a security under California law.
`11.
`XRP purchasers, including Lead Plaintiff, provided money consideration (in the form
`of fiat, including U.S. dollars, or other cryptocurrencies) in exchange for XRP. XRP purchasers
`reasonably expected to derive profits from their ownership of XRP, and Defendants themselves have
`frequently highlighted this profit motive and have taken steps to accomplish it, including by promoting
`XRP. Additionally, the development of the XRP Ledger, and the profits that investors expected to
`derive therefrom, were, and are, based on the technical, managerial, and entrepreneurial efforts of
`Defendants and other third parties employed by Defendants.
`12.
`However, Defendants did not register XRP with the SEC or qualify it with the
`California Commissioner of Corporations, and many of the representations Defendants made
`regarding XRP were designed to drive demand of XRP, allowing Defendants to obtain greater returns
`
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`4 See Investor Bulletin: Initial Coin Offerings, U.S. Securities and Exchange Commission (July 25,
`2017), https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_coinofferings; see also In re Matter
`of Munchee, Inc., File No. 3-18304 (S.E.C. Dec. 11, 2017), https://www.sec.gov/litigation/
`admin/2017/33-10445.pdf (“[T]okens, coins or other digital assets issued on a blockchain may be
`securities under the federal securities laws, and, if they are securities, issuers and others who offer or
`sell them in the United States must register the offering and sale with the Commission or qualify for
`an exemption from registration.”).
`5 A Former Top Wall Street Regulator Turns to the Blockchain, New York Times (Apr. 22, 2018),
`https://www.nytimes.com/2018/04/22/technology/gensler-mit-blockchain.html.
`6 Available at https://www.sec.gov/news/public-statement/statement-framework-investment-contract-
`analysis-digital-assets.
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`on their XRP sales. It is situations exactly like this that federal and state securities laws were enacted
`to prevent.
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`PARTIES
`13.
`Lead Plaintiff Bradley Sostack is an individual who at all times mentioned, was and is
`a resident of Saint Petersburg, Florida. Lead Plaintiff purchased 128,978.88 XRP between January 1,
`2018 and January 16, 2018 for approximately $307,700 in Bitcoin and USDT (a cryptocurrency issued
`by Tether). Lead Plaintiff sold that XRP between January 9, 2018 and January 17, 2018 for
`approximately $189,600 in Bitcoin and USDT. Lead Plaintiff therefore sustained a loss of
`approximately $118,100 as a result of his XRP investments. Lead Plaintiff was motivated to purchase
`XRP by the promotional activities of Defendants described herein. Lead Plaintiff saw and relied on
`Defendants’ repeated representations that adoption of XRP by financial institutions and banks would
`drive demand for XRP.
`14.
`Defendant Ripple Labs, Inc. is a Delaware corporation with its principal place of
`business in San Francisco, California.
`15.
`Defendant XRP II, LLC is a New York limited liability company with its principal
`place of business in San Francisco, California.
`16.
`Defendant Bradley Garlinghouse is the Chief Executive Officer of Ripple, a position
`he has held since January 2017. Garlinghouse was Ripple’s President and Chief Operating Officer
`from April 2015 through December 2016. Garlinghouse is a resident of San Mateo, California.
`Garlinghouse exercised control over Ripple and directed and/or authorized, directly or indirectly, the
`sale and solicitation of XRP to the public.
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`JURISDICTION AND VENUE
`17.
`This Complaint is filed, and these proceedings are instituted, to recover damages and
`to obtain other relief that Lead Plaintiff has sustained due to Defendants’ unregistered and unqualified
`offers and sales of securities in violation of Sections 5, 12(a)(1), and 15 of the Securities Act, 15 U.S.C.
`§§ 77e, 77l, and 77o, and Sections 25110, 25503, 25504, and 25401 of the California Corporations
`Code; and false advertising and unfair competition under California law.
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`18.
`This Court has subject matter jurisdiction over claims under the Securities Act pursuant
`to 15 U.S.C. § 78aa and 28 U.S.C. § 1331, and supplemental jurisdiction over the entire action under
`28 U.S.C. § 1367.
`19.
`This Court has personal jurisdiction over Defendants as a result of acts of Defendants
`occurring in or aimed at the State of California in connection with Defendants’ unregistered offers and
`sales of securities in violation of Sections 5, 12(a)(1), and 15 of the Securities Act, 15 U.S.C. §§ 77e,
`77l, and 77o, and Sections 25110, 25503, 25504, and 25401 of the California Corporations Code; and
`California’s false advertising and unfair competition laws.
`20.
`This Court also has personal jurisdiction over Defendants because they reside or have
`their principal places of business in California.
`21.
`Venue is proper in the United States District Court for the Northern District of
`California pursuant to 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b) and (c).
`
`SUBSTANTIVE ALLEGATIONS
`A.
`XRP’s Genesis
`22.
`Unlike cryptocurrencies such as Bitcoin and Ethereum, which are mined by those
`validating transactions on their networks, all 100 billion XRP were created out of thin air by Ripple in
`2013, prior to its distribution to investors and without any functionality. Twenty billion XRP, or 20
`percent of the total XRP supply, were given to the individual founders of Ripple. Founders Chris
`Larsen and Jed McCaleb each received 9.5 billion XRP, while Arthur Britto received 1 billion XRP.
`23.
`Ripple retained the remaining 80 billion XRP, which it planned to sell to fund company
`operations and to improve and promote the XRP Ledger.
`24.
`Ripple’s own wiki states that “Ripple Labs sells XRP to fund its operations and
`promote the network. This allows Ripple to have a spectacularly skilled team to develop and promote
`the Ripple protocol and network.”7
`25.
`In May 2015, regulatory authorities in the United States fined Ripple and XRP II
`
`
`7 Ripple credits, https://wiki.ripple.com/Ripple_credits#XRP_funds_the_development_and_pro
`motion_of_the_protocol_and_the_network (last visited Aug. 2, 2019).
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`$700,000 for violating the Bank Secrecy Act by selling XRP without obtaining the required
`authorization. As part of that settlement, Defendants acknowledged that they had sold XRP and agreed
`to a number of remedial measures, including registration with FinCEN.
`26.
`From December 2014 to July 2015, Ripple disclosed on its website the amount of XRP
`it held and the amount in circulation. The disclosure for June 30, 2015 stated that Ripple held
`approximately 67.51 billion XRP, more than double the approximately 32.49 billion XRP held by all
`others. The XRP held by others also significantly overstates independent holdings of XRP because it
`includes the 20 billion provided to founders and an undisclosed amount of XRP used in “business
`development agreements that are still pending.”8
`27.
`Ripple’s Project Manager for Risk and Compliance, Rebecca Schwartz, conceded this
`in a May 14, 2015 affidavit, stating: “The 9 billion XRP initially retained by Mr. McCaleb is included
`in the roughly 32 billion XRP that is available to the market.”9
`B.
`Defendants’ Primary Source of Income Is the Sales of XRP
`28. While Ripple sells and publicly touts its enterprise software products and solutions,
`including xCurrent, xRapid, and xVia (collectively, “Ripple Enterprise Solutions”), Ripple’s primary
`source of income is the sales of XRP.
`29.
`Ripple’s Chief Technology Officer, David Schwartz, has conceded “[a]s a corporation,
`we are legally obligated to maximize shareholder value. With our current business model, that means
`acting to increase the value and liquidity of XRP. We believe this will happen if the Ripple network
`is widely adopted as a payment system. We are pursuing multiple avenues at once. One would expect
`increased demand to increase price.”10
`
`
`8 Internet Archive, XRP Distribution, Ripple Labs (Aug. 6, 2016), https://web.archive.org/web/2015
`0806120942/https:/www.ripplelabs.com/xrp-distribution/ (last visited Aug. 2, 2019).
`9 Decl. of Rebecca Schwartz, Bitstamp Ltd. v. Ripple Labs Inc., Case No. 3:15-cv-01503-WHO (N.D.
`Cal. May 14, 2015), ECF No. 23-2.
`10 Bitcoin Forum, Re: Ripple: Why XRPs are superior to Bitcoins (May 12, 2013), https://bitcointalk.
`org/index.php?action=profile;u=27870;sa=showPosts;start=760 (last visited Aug. 2, 2019).
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`30.
`Defendants’ sales of XRP to the public accelerated rapidly in 2017 and early 2018, and
`Defendants have earned over $1.1 billion dollars through the sale of XRP since the beginning of
`2017—XRP which costs Defendants nothing since they created it out of thin air. Defendants sell XRP
`wholesale to larger investors and also sell significant quantities of XRP directly to the general public
`on cryptocurrency exchanges.
`31.
`According to Ripple itself, in the second quarter of 2019, XRP II “sold $251.51 million
`XRP in Q2 2019, including $106.87 million directly to institutional investors and $144.64 in
`programmatic exchange sales.”11
`32.
`In the first quarter of 2019, XRP II “sold $61.93 million of XRP in institutional direct
`sales and $107.49 million of XRP in programmatic [exchange] sales.”12
`33.
`In the fourth quarter of 2018, “Ripple sold $88.88 million worth of XRP,
`programmatically,” and XRP II “sold $40.15 million worth of XRP in institutional direct sales.”13
`34.
`In the third quarter of 2018, “Ripple sold $65.27 million worth of XRP
`programmatically,” and XRP II “sold $16.87 million XRP in direct sales.”14
`35.
`In the second quarter of 2018, “Ripple sold $56.66 million worth of XRP
`
`
`11 Q2 2019 XRP Markets Report, https://www.ripple.com/insights/q2-2019-xrp-markets-report/ (last
`visited Aug. 2, 2019)
`12 Q1 2019 XRP Markets Report, https://ripple.com/insights/q1-2019-xrp-markets-report/ (last visited
`Aug. 2, 2019)
`13 Q4 2018 XRP Markets Report, https://ripple.com/insights/q4-2018-xrp-markets-report/ (last visited
`Aug. 2, 2019)
`14 Q3 2018 XRP Markets Report, https://ripple.com/insights/q3-2018-xrp-markets-report/ (last visited
`Aug. 2, 2019)
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`programmatically,” and XRP II “sold $98.06 million worth of XRP in institutional direct sales.”15
`36.
`In the first quarter of 2018, “market participants purchased $16.6 million [of XRP]
`directly from XRP II.” XRP II also “sold $151.1 million worth of XRP” on exchanges.16
`37.
`In the fourth quarter of 2017, “market participants purchased $20.1 million directly
`from XRP II,” and XRP II sold an additional “$71.5 million worth of XRP” on exchanges.17
`38.
`In the third quarter of 2017, “market participants purchased $19.6 million directly from
`XRP II,” and XRP II sold an additional “$32.6 million worth of XRP” on exchanges.18
`39.
`In the second quarter of 2017, “market participants purchased $21M directly from XRP
`II,” and XRP II sold an additional “$10.3M worth of XRP” on exchanges.19
`40.
`The money raised through the sales of XRP substantially exceeds the amount of money
`needed to establish a functional network or digital asset. There is also little apparent correlation
`between the purchase price of XRP and the market price of any goods or services that can be acquired
`in exchange for XRP, which to date has not been functionally adopted nor used in any meaningful
`way.
`
`41.
`Ripple and its CEO, Garlinghouse, have repeatedly claimed that XRP has utility—like
`currency—in its use as a “bridge currency” for international payments. For example, in an interview
`that was published by Forbes on October 23, 2017, Garlinghouse was asked “Why do banks need
`XRP” and responded “It’s about liquidity. If you have a utility token like XRP that has a real value
`proposition.”20 Similarly, in an interview with BNN, retweeted by Ripple on December 14, 2017,
`
`
`15 Q2 2018 XRP Markets Report, https://ripple.com/insights/q2-2018-xrp-markets-report/ (last visited
`Aug. 2, 2019)
`16 Q1 2018 XRP Markets Report, https://ripple.com/insights/q1-2018-xrp-markets-report/ (last visited
`Aug. 2, 2019).
`17 Q4 2017 XRP Markets Report, https://ripple.com/insights/q4-2017-xrp-markets-report/ (last visited
`Aug. 2, 2019).
`18 Q3 2017 XRP Markets Report, https://ripple.com/xrp/q3-2017-xrp-markets-report/ (last visited
`Aug. 2, 2019).
`19 Q2 2017 XRP Markets Report, https://ripple.com/insights/q2-2017-xrp-markets-report/ (last visited
`Aug. 2, 2019).
`20 Is Ripple for Real? A Closer Look at the Company Behind the Third Most Valuable Digital
`Currency, Fortune (Oct. 23, 2017), https://fortune.com/2017/10/23/bitcoin-ripple-brad-
`garlinghouse/.
`
`
`
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`10
`CONSOLIDATED FIRST AMENDED COMPLAINT
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`Case 4:18-cv-06753-PJH Document 87 Filed 03/25/20 Page 12 of 57
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`
`
`Garlinghouse stated: “If they [digital tokens] are solving a real problem, and that problem has scale,
`and that problem, you know there is real value there, then there will be demand for the tokens and the
`price will go up. For XRP we have seen because it’s required, it’s something that can really reduce
`the friction, and we’re talking about a multi-trillion dollar problem in how cross-border payments
`flow. And so, I think if you drive real utility, yes there’s going to be demand for that.”21 In a December
`27, 2017 interview with CNBC, Garlinghouse once again stated “we use XRP to settle liquidity
`between banks.”22
`42.
`Similarly, in a February 14, 2015 Submission to the Conference of State Bank
`Supervisors, submitted by Ripple’s Chief Compliance Officer Karen Gifford, Ripple claimed that it
`“is designed to be used directly by (1) banks and financial services business, (2) payment networks,
`and (3) liquidity providers.”23 In that same Submission, Ripple stated 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.”24 Ripple posted this
`submission on its website and publicized it through its Ripple Insights blog.25
`43.
`However, as discussed above, more than 60 percent of XRP is owned by Ripple and
`none of that XRP is used for anything at all, other than to be sold in the future to investors. Moreover,
`as for the XRP that was already sold or otherwise distributed by Defendants, the vast majority, if not
`all, of it is not used for bridging international transactions, but for investment purpose. Accordingly,
`Defendants’ claims that XRP has a utilitarian purpose are false and were false when made. These
`
`
`21 See @JonErlichman, TWITTER (Dec. 14, 2017, 9:11 AM), https://twitter.com/jonerlichman/
`status/94135496422752261.
`22 Ripple CEO explains why his digital currency can transform banking, CNBC (Dec. 27, 2017),
`https://www.cnbc.com/video/2017/12/27/ripple-ceo-explains-why-his-digital-currency-can-
`transform-banking.html.
`23 Ripple Labs, Inc., Submission to the Conference of State Bank Supervisors, p.8 (Feb. 14, 2015),
`https://ripple.com/files/rl_csbs_letter.pdf.
`24 Id. at 29.
`25 Regulations & Compliance Update: U.S. Treasury, CSBS, and Canadian Senate, Ripple Insights
`(Mar. 3, 2015), https://ripple.com/insights/regulations-compliance-update-u-s-treasury-csbs-and-
`canadian-senate/.
`
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`Case 4:18-cv-06753-PJH Document 87 Filed 03/25/20 Page 13 of 57
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`claims also omitted material information regarding XRP’s lack of utility that was within exclusive or
`superior knowledge of Defendants. These claims are misrepresentations and omissions of material
`facts to investors because the utility of XRP (or lack thereof) is pertinent to the value of XRP. Simply
`stated, these false claims about XRP’s utility are nothing but an attempt to avoid the application of
`securities laws and drive demand for XRP.
`C.
`Defendants Market XRP to Drive Demand and Increase Price
`44.
`Given its reliance on sales of XRP, it is unsurprising that Ripple aggressively markets
`XRP to prospective purchasers, including Lead Plaintiff and the Class, to drive demand, increase
`XRP’s price, and thus its own profits.
`45.
`Ripple has an entire section of its website dedicated to providing advice on “How to
`Buy XRP.” This section provides links to exchanges and instructions on “how to buy XRP” on those
`exchanges.26 It also has a section titled “Market Performance” which proclaims that Ripple is
`“committed to the long term health and stability of XRP markets.”27
`46.
`Ripple also consistently promotes the availability of XRP on exchanges. For example,
`on May 18, 2017, Ripple’s Senior Vice-President of Business Development, Patrick Griffin, tweeted
`a link to the Kraken exchange with the caption: “Kraken Introduces New Fiat Pairs for XRP Trading!
`USD, JPY, CAD, EUR @Ripple.”28
`47.
`Similarly, on or about December 21, 2017, Ripple tweeted in Japanese that XRP was
`now available on over 50 exchanges.29 That tweet linked to an article on Ripple’s website which
`described XRP as “the fastest and most scalable [digital] asset on the market.”30 It continued, “[t]he
`market is taking notice of XRP’s speed, reliability and scalability — which has strengthened the
`demand for XRP and where it’s listed. In fact, we’re proud to announce that XRP has gone from being
`
`
`26 XRP Buying Guide, https://ripple.com/xrp/buy-xrp/ (last visited Aug. 2, 2019).
`27 Market Performance, https://ripple.com/xrp/market-performance/ (last visited Aug. 2, 2019)
`28 @patgriffin9, TWITTER (May 18, 2017, 10:03 AM), https://twitter.com/patgriffin9/status/
`865251321867231233.
`29@Ripple, TWITTER (Dec. 21, 2017, 4:20 PM), https://twitter.com/Ripple/status/943999526
`783905792.
`30 XRP Now Available on 50 Exchanges Worldwide, https://ripple.com/insights/xrp-now-available-
`on-50-exchanges-worldwide/ (last visited Aug. 2, 2019).
`
`
`12
`CONSOLIDATED FIRST

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