Ripple Labs and R3 Reach Confidential Settlement On All Outstanding Lawsuits
In an official and joint press release, Ripple Labs and the R3 consortium announced that they have resolved all their outstanding lawsuits in a private and confidential settlement agreement.
In yesterday’s joint press release, Ripple and R3 announced that they have settled their prolonged legal battle.
Details of the agreement will remain confidential, and both companies are excited to “putting these disputes behind them”.
It’s undoubtedly one of the major positive developments for Ripple Labs when compared to its recent legal troubles.
Ripple Labs Vs. R3 Hold Co. legal battle
The source of the disagreement between the two companies dates back to June 2016.
Ripple’s former CEO Chris Larsen signed a massive agreement with the R3 Hold umbrella, guaranteeing the consortium 5 billion XRP tokens to purchase any time before December 2019.
R3 was given the preferential option to complete the purchase either entirely or in installments for about $0.0085 per token.
Litigation between the blockchain company and the R3 Consortium began last September when the consortium accused Ripple of reneging on their agreement for preferential token prices.
After a Delaware judge dismissed the case, R3 redoubled their efforts, suing Ripple in New York.
R3 initially promised it would use its bank connections within the consortium to help Ripple acquire key partnerships. Some of the banks are said to have included JP Morgan, Goldman Sachs, and Morgan Stanley. At the time of the deal, these banks were members of the R3 consortium.
Ripple, in a countersuit in California, accused R3 of failure to uphold certain promises and of bad faith opportunism with regard to their previous purchasing agreement. XRP had grown almost 30 fold since the agreement was signed.
It seemed the increasing value (as seen at the time), would have led to significant financial gain for the consortium.
Ripple’s legal team argued that R3 was trying to profit off of Ripple’s blockchain experience, with the intention of using that expertise to develop a product that would compete with theirs.
The countersuit also argued that R3 Hold Co either had prior knowledge or should have known that most of the key banks Ripple hoped to connect with were set to exit from the consortium.
The court proceedings began at a time when the total value of the entire R3 chunk was just over $1 million.
Ripple suffered a blow when it lost its appeal in the California First District Court of Appeal in March 2018, which meant that the case would be heard and determined in New York.
Legal proceedings were still pending before the court when this latest joint statement came out, indicating that a settlement has been reached.
Small win for Ripple
Ripple is certainly feeling relief, having spent much of 2018 fighting an increasing number of legal battled, many of which surrounding its XRP token.
A number of these lawsuits have accused Ripple of selling a security token to investors. In May, California investor Ryan Coffey went to court asserting that the XRP token was a security.
Ripple’s (XRP) never-ending ICO
He also claimed that the company’s continued sale of XRP tokens was in violation of the U.S. securities laws, terming the sale as a “never-ending ICO”.
Two other similar lawsuits by investors Vladi Zakinov and David Oconor are also in court, seeking a determination of whether the token is a security or not.
Ripple continues to maintain its stance that XRP is not and should not be declared a security. Ripple argues that XRP token was created long before the company, and is completely different from the technology and services the company provides.
Ripple’s chief market strategist made the following statement explaining the differences:
“XRP is a digital asset that trades on its own that’s owned by lots of people in lots of places. We happen to own a lot of XRP – we own a lot of cash, chairs, and computers – but the company is called Ripple and we sell software.”
Ripple has a vested interest in proving the token is not a security.
Declaring the token a security may impact negatively on its value, but above all else, Ripple Labs would have violated United States securities laws that require such assets to fulfill a number of stringent requirements.
The Howey Test
One way of determining whether a crypto token is a security is to subject it to the Howey Test. Securities, according to the Howey Test, will involve an investment of money made in a common enterprise.
Often, the investor expects to come into a profit, especially from the efforts of the given company’s promoters or through the work of a third party.
The settlement with R3 leaves Ripple with time to focus on the lawsuits filed by various investors.
Despite the departure of its general counsel Brynly Llyr a few days ago, Ripple’s legal team includes former employees of the United States Securities and Exchange Commission.
The startup is confident in their ability to prove in the court of law that XRP is not a security.
Ripple (XRP) remains the third largest cryptocurrency by market capitalization according to XBT.net. It currently has a market cap of $10.5 billion and trades at $0.256 against the U.S dollar.