Ryan Coffey is an XRP investor who claims he had lost money in the purchase and sale of XRP, claiming the cryptocurrency is a security and that it had allegedly violated both state and federal securities laws.
San Diego attorney James Taylo-Copeland represented Coffey and filed a class action lawsuit against Ripple in the San Francisco County Superior Court last Thursday. According to the lawsuit, Coffey is seeking damages not just representing himself but also on behalf of all the investors who had purchased XRP from January 2013 and onwards.
The U.S. federal law states that companies are required to register with the Securities and Exchange Commission (SEC) before they are allowed to sell any securities.
To determine if XRP is indeed a security, the Howey test—a standard from a Supreme Court case from 1946—is used.
According to the test, an instrument is considered a security if 1) it involves an investment of money and 2) profits are expected from the said investment. And according to the complaint filed by Coffey, XRP fits the bill perfectly.
Executives at Ripple, however, deny the claims stating that XRP is “exempt” from the classification.
Below is a copy of the complaint: