The Judge is considering whether to certify the Zakinov v. Ripple class, as the case raises a question of first impression.
Following yesterday’s class certification hearing in the Zakinov v. Ripple lawsuit, U.S. District Judge Phyllis J. Hamilton is considering whether to certify the classes of selected investors who accuse Ripple of engaging in unregistered securities offerings.
According to a report from Law360, a subscription-based legal news service, Judge Hamilton noted that the case of whether XRP could be considered a registered security raises a question of first impression.
Per Judge Hamilton, the ninth circuit has not clarified whether courts can certify classes of investors who are at loggerheads over whether specific cryptocurrencies constitute unregistered securities.
The Judge acknowledged that certifying such a class is likely a new area of law that has not been addressed in the past. She recounted her experience during a recent judicial conference held by California’s Northern District. The conference, which had a panel on cryptocurrency securities litigation, left attendees confused at the end.
“All of us looked just as confused at the end [of the panel] as when it began,” the judge said.
However, Judge Hamilton believes that whether crypto constitutes security depends on what prompted the investor’s decision to purchase the asset in the first place.
It bears mentioning that Judge Hamilton commented during yesterday’s hearing on a motion to certify a class of all XRP holders who purchased, sold, and held the sixth-largest cryptocurrency at a loss.
The complainants alleged that Ripple Labs held an illegal ICO for XRP without registering with the appropriate authorities- the U.S. Securities and Exchange Commission. The complainants also accused Ripple of using deceptive tactics to increase profits from the XRP price surge, adding that the blockchain company created 100 billion tokens out of nothing while holding an unending Initial Coin Offering since 2012.
In the motion, the plaintiff requested that the Judge certify a nationwide class and a California subclass of XRP holders who purchased the cryptocurrency from 2017 till date and incurred losses in the process.
The plaintiff’s counsel, Nicholas N. Spear of Susman Godfrey LLP, who requested that the Judge certify the class, claimed that damages can be calculated by subtracting losses from the initially purchased amounts.
The counsel argued that it is irrelevant whether some XRP investors consider cryptocurrency a registered security. He adds that the SEC already considers XRP as a security and that any class member who is against the premise of the suit can leave.
Defendants Think Otherwise
In contrast to this opinion, the defense counsel Andrew Z. Michaelson of King & Spalding LLP, argued that the suit is excessively broad and does not distinguish between investors who purchased XRP directly from Ripple and those who acquired the asset from secondary markets.
According to Michaelson, thousands of XRP investors disagree with the premise of the class, and 3K potential class members submitted affidavits in the SEC v. Ripple lawsuit attesting to that position.
“Opting out is not always a solution. It’s not sufficient when numbers are this great,” said Michaelson.
The defendants’ counsel noted that it is important to consider whether an investor purchased XRP for cross-border transactions or for profiting and day trading.
Attorney Deaton Reacts
Meanwhile, the class certification hearing sparked reactions from members of the XRP community. CryptoLaw founder attorney John Deaton, who filed a motion for leave to file an amicus brief to represent over 75K XRP holders in the lawsuit, seemed frustrated with the proceedings.
“I’ve never been so frustrated in my legal career watching this Zoom hearing,” said Deaton.
Deaton seemed frustrated because the defense counsel did not understand XRP, and he could not speak to address the questions and issues raised by Judge Hamilton.
Mainly because I can’t speak and address the questions and issues being asked by the Judge. The problem is no one understands the tech.
— John E Deaton (@JohnEDeaton1) April 26, 2023
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