Ripple coin (XRP) on computer's motherboard

A federal judge in Oakland has largely turned back a bid from lawyers for San Francisco-based financial technology company Ripple Labs who were seeking to knock out claims that sales of its XRP cryptocurrency violated state and federal securities laws.

In an order issued Wednesday, U.S. District Chief Judge Phyllis Hamilton of the Northern District of California on Wednesday actually adopted the position of Ripple Labs' lawyers at Boies Schiller Flexner and Debevoise & Plimpton that the three-year statute of repose applicable under the federal securities laws should run from XRP's first "bona fide" offer to the public. However, the judge found that the Ripple Labs and its codefendants, including CEO Bradley Garlinghouse, didn't make their first public offering of XRP before Aug. 5, 2016, the cutoff date three years prior to the plaintiff filed suit.

Ripple Labs lawyers had argued that sales prior to the company's 2015 settlement with the federal government for violations of the Bank Secrecy Act triggered the statute of repose and that the plaintiffs themselves had claimed in court papers that those offering were made to the "general public." But Hamilton found that the activity identified in settlement agreement with the government either showed specific transactions with particular individuals or entities or referred to sales without indicating whether they were public offerings.

"The court cautions that, once the parties have developed a factual record, it may revisit its determination on whether defendant made their first bona fide XRP offer to the public before or after August 5, 2016," Hamilton wrote. "However, based upon the allegations and judicially noticeable facts properly before this court on this motion, the court cannot find that such offer occurred outside the three-year statute of repose."

Hamilton's ruling didn't address the plaintiffs' core claim, that XRP qualifies as a security under California state and federal securities laws, since the defendants assumed that theory was true for the purpose of their motion to dismiss.

Boies Schiller's Damien Marshall didn't immediately respond to a message seeking comment on the ruling Wednesday.

Hamilton's ruling did side with defense arguments that the plaintiffs did not adequately allege that Ripple Labs had made misrepresentations in violation of the California securities laws. Plaintiffs claimed that Ripple falsely claimed that XRP had utility as a 'bridge currency' for international payments when in reality it was more than 60% owned by the company and had no use beyond being sold to potential investors. Hamilton noted that plaintiffs hadn't specified who among the defendants had made such statements, when they were made, who they were directed at, or how they'd been communicated.

Plaintiffs in the suit are represented by Susman Godfrey and Taylor-Copeland Law. "We are thankful for the hard work that went into the Court's consideration of the issues raised in the motion to dismiss," Susman Godfrey's Oleg Elkhunovich said in an email. "We look forward to getting into the discovery stage of the case, and proving the claims at trial."

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