Fenwick securities enforcement co-chair Michael Dicke spoke with The Recorder about a new lawsuit against fintech company Ripple Labs alleging that it has been conducting a “never-ending ICO” in violation of securities laws.
Filed in San Francisco Superior Court, the lawsuit against Ripple Labs comes after questions arose whether its tokens – called XRP tokens or “Ripples” – are actually unregistered securities.
Dicke, formerly the head of enforcement for the U.S. Securities and Exchange Commission’s San Francisco regional office, told The Recorder, “The Ripple class action lawsuit creates a danger to the continued development of innovative blockchain-based currencies, given the potential of such private litigation to create uncertainty within the developing cryptocurrency markets.”
Dicke also talked about how state courts maintain jurisdiction over class actions brought under the Federal Securities Act of 1933 under the U.S. Supreme Court’s decision in Cyan v. Beaver County Employees Retirement Fund. He noted the difference is that, in state court, there is not an automatic stay of discovery in securities cases. This is contrary to federal court, where a stay remains in place until the case has survived a motion to dismiss.
“It’s definitely Cyan rearing its head. You’re not going to get any of the protections of the Private Securities Litigation Reform Act that would restrain discovery in federal court,” Dicke noted.
The full article is available on The Recorder (subscription required).