Ripple (XRP) lawsuit gains momentum

Ripple, or the Ripple Protocol is based on a distributed open source internet protocol, consensus ledger and cryptocurrency XRP. In short, that means that the Ripple protocol can be used by banks and payment networks as settlement infrastructure. American Banker states that “from banks’ perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like Bitcoin,”

Things are going well for Ripple too recently they announced a significant deal with MoneyGram a money transfer company based in the U.S. It is significant because MoneyGram will be the first to pilot XRP, via a Ripple entity xRapid, in a hope to provide liquidity to financial institutions.

However, things haven’t always gone so well for Ripple. In 2016, the former CEO of Ripple, Chris Larsen made what can only be described as a critical decision. Larsen did a deal with R3, a bank consortium building its project on the blockchain, inclusive of an option for R3’s partner to buy 5 billion units of XRP for $0.0085 per unit.

As of today’s date each XRP is worth $2.10, you don’t need to be a mathematician to work out the option contract is now worth a lot of money – it is estimated as being worth at least $12 billion.

 In a legal twist, the two sides are now embroiled in a battle in court to decide who can keep the billions of dollars of XRP. The litigation did begin its life in California and Delaware but due to procedural issues, the litigation now lies in the court of New York.

The litigation features a counter claim from Ripple, claiming that it terminated R3’s agreement when R3 did not fulfil its promises, Ripple went on to state that R3’s purported exercise of the options contract was made in a opportunistic manner following XRP’s rise in price.

A new filing has come to light, in the documents that include a number of emails from R3’s CEO, David Rutter, state that Ripple should not be required to honour the options contract because R3 did not hold up its promises it did not “assist Ripple sign up a single bank”. It goes on to states that Rutter knew that Goldman Sachs, J.P. Morgan and Morgan Stanley were going to pull out of R3 but crucially R3 did not inform Ripple:

“Rather, R3 had misrepresented its resources and current ability to perform solely to induce Ripple into executing the Agreements. For example, although R3 represented to Ripple that it would have access to its large consortium of leading banks, R3 knew and had reason to know that several key banks that would be instrumental to Ripple’s success would soon be departing from its consortium.”

However, R3 does not agree, it states that the Ripple’s decision to terminate the options contract was unjustified and that the real reason was because it was “in the money”.

Ripple is having a huge upswing, many banks have been persuaded to use its infrastructure. I however, would be wary of the underlying litigation.Â

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