Ripple’s Legal Turmoil Escalates: XRP Holders Pose Threat in Court

Ripple’s legal challenges continue to mount as XRP holders turn against the company in court, further complicating the already intense dispute with the U.S. Securities and Exchange Commission (SEC). Ripple Labs and XRP holders are on edge as they await the crucial Summary Judgment in the protracted legal battle. The Zakinov v. Ripple Labs lawsuit, brought by a faction of XRP holders who claim that XRP is a security, could potentially impact the outcome of the central SEC vs. Ripple case.

XRP Holders Join the Fray

The most recent hearing in the Zakinov v. Ripple Labs case occurred on April 26, 2023, with around 500 members of the public permitted to attend the hearing online on Zoom. The purpose of the hearing was to present oral arguments on the certification of the class of XRP holders opposing Ripple.

Bradley Sostak, an XRP holder for only two weeks, requested the court to allow him to serve as the lead plaintiff in the class-action lawsuit, representing all XRP holders, including investors who either owned or sold the cryptocurrency at a loss.

“Fake” XRP Holders and Skepticism from the Judge

During the hearing, Nick Spear, a lawyer representing Zakinov, argued that approximately 75,000 XRP holders are allegedly “fake” and therefore irrelevant. Spear attempted to explain how damage calculations could be conducted. District Judge Phyllis J. Hamilton expressed her skepticism about the global class-action lawsuit, noting that there is no precedent for such a case.

Attorney John Deaton’s Concerns

John Deaton, an Amicus Curiae in the Ripple vs. SEC case, voiced his lack of confidence in the judge denying the class certification. Deaton stated that if the judge approves the certification, the case may be challenged on appeal. Deaton also applied for amicus status in the Zakinov litigation but was not allowed to appear at oral argument.

Ripple’s Defense Strategy

Ripple attorney Andrew Michaelson argued that XRP buyers did not rely on Ripple, including those overseas. He presented evidence of the 75,000 XRP holders who support Ripple in the SEC case and do not want to be part of the class action. Michaelson also explained why a “class” is not a suitable solution, as it would force 74 holders to “opt-out.”

Judge Questions Cryptocurrency Use Case

The judge questioned the reasons behind holders purchasing cryptocurrency and asked about the Howey test as an objective measure. She wanted clarification on whether cryptocurrencies have a use case. Michaelson highlighted several uses, such as cross-border payments, and agreed with the judge that use cases are essential. Furthermore, he emphasized that the plaintiffs made purchases on the secondary market, meaning there was no written contract between them and the defendant.