A plaintiff, Thomas Sandoval, is lodging a class action lawsuit at a San Francisco federal court against Coinbase. He alleges that the exchange received commissions by helping Ripple sell XRP without registering with the United States Securities and Exchange Commission (SEC), approving them to sell securities, a filing captured on Dec 30 reveals.
The Sandoval v. Coinbase Case
In the Sandoval v. Coinbase, 20-cv-09420, U.S. District Court, Northern District of California (San Francisco), Thomas claims that Coinbase knew that XRP was unregistered security. However, they proceeded anyway, earning commissions that gave it a competitive advantage.
Now that the SEC is suing Ripple, Thomas is suing for damages since he and other consumers paid commissions to the exchange that in turn sold XRP tokens, raising $1.3 billion.
In his complaint, he said XRP’s success directly depended on the success of the remittance company. However, Ripple and its executives have repeatedly stated that XRP performance isn’t tied to Ripple. The two companies, Ripple Labs (the official issuer of XRP) and Ripple—the for-profit company and the majority owner of the XRP coin, are distinct.
“Until late this month Coinbase sold the XRP token, the value of which was entirely linked to the success or failure of Ripple Co. and the managerial efforts of its executives. Indeed, Ripple Co.’s survival as a corporate entity depended on its sale of unlicensed XRP securities to the public to fund its business operations.”
Exchanges Delisting XRP
Still, Coinbase has joined other exchanges, including Binance and Bitstamp, suspending the trading of XRP until after there is proper determination. The San Francisco exchange will, nonetheless, continue offering other services, including XRP custody.
The case comes when the exchange is planning to go public, filing a draft registration with the SEC earlier this month.
If approved and the agency greenlights Coinbase application, then it would be a watershed moment for crypto as an emerging industry. The initial public offering could also be the first in the United States tied to a company facilitating crypto services.
As reported, the U.S. District Court of the Southern District of New York has fixed the pretrial date for the Ripple versus SEC case on Feb 22, 2021.