’

ROBBINS ARROYO LLP

FILEB
BRIAN J. ROBBINS (190264) SAN MATEO COUNTY
; STEPI-IEN J. ODDO (174828)
.- ERIC M. CARRINO (310765)
1

'3; .600 B:- Street, Suite 1900

’ '
San Diego, CA 92101
Telephone: (619) 525-3990
.

:3? Facsimile: (619) 525- 3991

3; (E—‘ma1l: brobbins@robbinsarroyo. com
‘
1
soddo@robbinsarroyo. com
eearrino@robbinsarroyo com
:-

iAttpineys for Plaintiff

L.[Ac§1i<{11tional Counsel on Signature Page]

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN MATEO

'
‘

VLADI ZAKINOV Individually and on

_
1
Be 'alf of All Others Similarly Situated,

Plaintiff,
COMPLAINT FOR VIOLATIONS OF
CALIFORNIA CORPORATIONS CODE

1
:DEMAND FOR JURY TRIAL

—_
("’18 cw — 02845
=
cMP
',
Complaint

'la1111111111111111
_

"‘ '1
‘ “W " ' "
cLAssDACTION COMPEA‘INT”‘""“:‘
1
 INTRODUCTIOV
Plaintiff, individually and- on behalf of all others similarly situated, by hIS ‘:

igned attorneys, alleges the following based upon personal knowledge as to plaintiff and

planitiffs own acts, and upon information and belief as to £1 other matters based on the
‘

(in siigafion conducted by and through plaintiffs attorneys, which included, among other things,

ew of media and reports about the Company and Company press releases against~

ants Ripple Labs Inc. ("Ripple" or the "Company"), its wholly owned subsidiary XRPfIEI:

;:("XRP II"), and Ripple's Chief Executive Officer, Bradley Garlinghouse ("Garlmghouse")

{Plaintiff believes that substantial additional evidentiary support will exist for the allegations set ET

" '9

:3

H
SUMMARY OF T
«w

; . ‘ \ . I
aiifornia citizens who purchased
1:1,;

:or therwise acquired Ripple tokens ("XRP") issued and sold by defendants.
few,”

c; 3. XRP, despite its name as a "token," is actually a security under California law. In
H,

.1.

awning:

They did not Instead, they made a series of unproper statemems which drove up the price of
:3 xup~ allowing defendants to obtain greater returns on their XRP sales

JURISDICTION ANI; VENUE

,,,,, This Court has JurisdIction over the causes of action asserted herein pursuant to

the California Constitution, Article VI, section 10, because this case is a cause not given by

,statute to other trial courts

-‘1 .1“,
CLASS ACTION COMPLAINT
 ,_1

came

coax:

2‘
have their principal places of business in Callfomla.
.—*‘3"3,,--‘

THE PARTIES
"T‘,
N Plaintiff
‘:
Haw—12:2»

10.Pla1nt1fi' Vlad1 Zakinov sfia Citizen of Califorma Plaintlff purchased gRP 1n

‘

i; January 2018 and was damaged thereby

5‘?

=—-

; Defend ‘ ts
1-4
0‘!
,

1—» ‘4

j... 00

of;
H

N iro-

.‘

N};
P--‘

‘ ,N,

.N

7,19,.

C‘s
N
A

N \1

1
N
,oo-‘

Defendant Garlinghouse IS a California citizen and a reSIdent of San Mateo County

" a
-2- ‘ ~~
‘
CLASS- 'A’CT10N COMPLKINT
 Si
1 14 The iru names and capacmes of defendants sued herein under. California Code of
::

.01

\1
RIPPLE INDISCRIMINATELY OFFERS XRP TO THE PUBLIC
AT LARGE WHICH PLAINTIFF ANI) THE CLASS INVESTED
4.09

250
1:
i

10: ~

15.
:

3:
11‘ the var1ous exchange
‘

12 prov1desstepbys

i4;
i:
15‘.

is

is} f _i

19:.

29?

.21?

I: :15
w
23
19 Ripple concedes that it "sells XRP to fund its operationsggan

:24: network This allows Ripple [] to have a spectacularly skllled :team to deve

5.6;;

27 j revenue fqr‘the Company.

..
-3 -
CLASS ACTION COMPLAINT
 ‘1220. In additlon plaintiff and the Class members rivestment is entlrelyspasswe

Plaintiff and the Class have no ability to céntro the: diréEtion of

:‘K 1 he Company or IthE i“:

billipn-
H
zr‘liest
23 Rlpple prowded 1tE founders w1th twenty billion XRP and held 6 :“iiié E

‘‘‘‘
24 Ripples control over XRP' supply is drferent than mother popular {
at‘control of the

eurrenpy is supposedly. :‘Fdecentrahzedf' In contrast to a governmental system; where, for * 3

example in the United States, the Federal Reserve system controls the supply of currency,“
1,.5-42 ‘

CLASS ACTION COMPLAINT

 ‘
-

cryp ocurrencies work through distributed ledger technology, which has no central adnnmstrator
c“: tralized data storage It is the ledger of a cryptocurrency that can record transactlons
or
between two parties. This instant creation of the XRP security, which its set cap, stands 1n stark

con“ ast to other well- known cryptocurrencies, such as Bitcoin, which are constantly being

Ripple created and continues to work on the XRP Ledger, in which XRP
*
adoptlon and value depends. The XRP Ledger, as opposed to E-itcoin, is not decentralized, as

asically admits. The Company has a multiple page explanation on "The XRP Ledger
:

,, .Con nsus Process" on its website. There, Ripple explains how the "nodes" of the network sh
‘3
1nformat1on about candidate transactions, which validates the transactions. Unlike Bitcoin if“
:1
a:
Eth urn, which 15 open to the world, the XRP Ledger nodes "evaluate proposals from a specif'

;
set eers, called chosen validators [also known as Uniduq Node Lists ("UNLs")]. " These
(

UN : : are chosen by Ripple itself based on what it deems "trusted, " meaning nodes that will 11'

collude

26. In its long discussion of the XRP Ledger Consensus Process, Ripple never calls
’XRP‘9dé5centralized, though it does confusingly say the ledger ccnsists of "distributed" serve”:
‘

Rather it claims to have come up with a plan "to 1ncrease decentralization and ensure that
1

18:5,: single entity has operational control of the XRP Ledger. " While the XRP Ledger could one d

be de ntralized, it is not currently Instead, Ripple adnnts that "Beyond our work

decentrahzahon, we have also focused on refining and 1mprovi11g the XRP Ledger Consens
In
Protocol, the algorithm underlying the XRP Ledger."

27. On February 6, 2018, BitMEX ran an article titled "The Ripple Story," in the 2

, wake of XRP' s substantial increase in value. In short, the researchers found that "the default

;
behavrour of Rippled nodes effectively hands full control over updating the ledger to the '.

‘
‘

'
:i Mining when transactions are verified and added to the public ledger, known as a blockchain,
13

as
a means through which new bitcoin are released.

-5_
CLASS ACTION COMPLAINT
 9‘

‘4
.

9°

\9

is‘ centralised.3 Indeed, our iiode indicates that the keys expire on :1
February 2018‘

263;: ; Intuitional use case desxgned to sglve a multltnlhon—dollar problem—the global

3 payment and liquidity challenges that hanks, payment prov1ders arid corporates
27' ‘
face

. .. w—6—f.‘ .

CLASS ACTION COMPLAINT

 3 '5

23 :to confirm dehvery‘once it settles." xV1a is for orporates payment prov1ders and banks who 2i

‘24:

25:5

‘26?

2The only product that actually needs XRP is xRap1d xRapKl is supposedly _"for payment.
:1
prov1ders and other. financial instittiticns Whof Waiit to Ininimize liquidity costs While lr‘nproving
their customer experience. Became payments into emerging markets often require pre-funded
28.

_7_ 1.
I, . .
I"
CLASS ACTION COMPLAINI
 ‘ 'l»

For instance ,. onrJune 28,2 2017 defendant Garhnghous ~

art1c1pated an‘ 2

363 in
‘1nterv1ew on CNBC During the interview, defendant Garlmghouse discussed why XRP was "a

'01
'

jR1pp1e than‘retweeted a portio offithat mterVIew that was or131na11y tweeted by the CNBC

>1
reporter

:cii"..l'<>°

border pay ents There

1“
2.05 15 a

'Nasdaq com stating "Ripple adoptlon'lS sparking mterested 1n )CRR''whieh had an impresswe

1: :c‘iirrency aCCOunts around the World, liquidity costs are hiEh xRapid dramatwally lowers
105211
the capital requirements for liquidity

13.2;‘13 _
.: -8-,,
CLASS AC rION COMPLAINT
 H ‘months '"
E

1 (irially inth “1 ..
lhe quoted article discussed how. finanmal institutions vizere
i

.21

:41.

5
2:;

8‘?

9_
210.:
s:

4;: :11?-

125

l’
g

13

'
.15

16:

-‘
1:7:

18 .....
.: FIS.
19f
.j 2 ~
'::‘~3~:2XRP. isn't used for anythmg Ihe hope is that someday it wil1be by banks,
2Q ‘;
.
but there really aren't banks s1gnalmg that yet;
”i
21 I would be surprised I there ha een any re3l' bank to bank transact1ons
-- 1 "
1E
done w1th Sit (outs1deo maybe te ansactlons) desp1te people maklng
H '5 "I ‘
2.2 claims to the contrary ‘~
.

23 ~‘
It'ts not clear to me why. XRP would be: used by banks at 311.. XRP could
.. =1 {O

24:.
..
potent1ally be adopted by consumers as a payment :31]; although they don’t
.
_. ‘_ :
25
.
‘
- I haven’t seen a suffimently large catalyst 1n the fundamentals of Ripple to
‘1
"
26 1
justify greater than 10x m0ve in the price of $XR3 dyer the last month.
a
2.17“ '5‘:‘:I11.a. ew years we 're going to loolg back on 2017Ia1d§1hi11k WTF were we
thinking."
28:};
I

. .. 3-9- .. ..
_

:‘CLASS ACTION COMPLAINT

 ‘
)
‘
/

”I"

.
\.
2. Defendant Garlinghouse responded by tweeting: “Over the last few months I've
2
41.."

N .. spoken with ACTUAL banks and payment providers. They are indeed planning to use xRapid
u

w :(our RP liquidity product) 1n a serious way... ." Ripple's XRP product manager, tweeted: “Do

e you nk I left #Bitcoin and joined @Ripple to build bank software? Think again. SXRP."
w 43. Accordingly, as shown above, the defendants ac -ed on behalf of the common": :3

; enterprise with the expectation of increase the value of XRP, and thus causing a profit.

CLASS ACTION ALLEGATIONB

vmsm :

‘44. Plaintiff brings this class action 1nd1v1dually anion behalf of all Cahiornia

mtuens who purchased or otherwise acquired XRP from January 1,2013 to the present (the
10;“"Class") Excluded from the Class are defendants and their fantlies, the officers and directors 2

1 1}

123; legal rcprcsentatwes heirs, successors, or assigns, and any entity in which defendants have or

13f had a- controlling interest.

45. The members of the Class are so numerous that joinder of all members is

"cable. While the exact number of Class members is unknown to plaintiff at this time and

identified frOm reorirds maintained by Ripple and may be notified of the pendency of this action

j.
by mail using the form of notice similar to that customarily used 1n class actions.
46. Plaintiffs claims are typical of the claims of the members of the Class, as all 3

members of the Class are similarly affected by defendants' wrongful conduct, as complained of
'

herein.

47. Plaintiff will fairly and adequately protect the interests of the members of the ‘3

3
Class and has retained counsel competent and experienced in class and securities litigation.

48. There are no unique defenses that may be asserted against plaintiff individually, :1

as diftmguished from the other members of the Class. Plaintiff has no interest that IS in conflict 3;

With or is antagonistic to, the interests of the members of the Class, and has no conflict with any ‘
5:

y-10_-
‘
CLASS ACT ION COMPLAINT
 other members of h Cla »

Plamtrff has‘retamed competent corms 1 xperi‘enced 1n securltles ;_5

33

19;:{1‘5

consumer protect1on Earid Class acnon lltlgatron to represent hrmself an he Class.

“97“

.1

4:?

"-",.

I‘llz'izo‘

‘°”'I°°

@931

....__

,.

.
‘r—‘,
s.-

"

J."
,",“:'::"fl'_‘n7§:

'

“'3

b—I
0".

.:r.—I

O‘L"

v—!

1—-

“:2"?
H
'
1H“,

$077109

H
4

O
..

,.

wH

1m m
93.4:

J.
N
,1.
.,
H33,

,
.
. N 5'11” "4}-

1....

wawwgsc‘,
N U] ,;

A
_
(11:1.

N
0‘“
5.5; Defendants and~each:of them by engagmg iii the conduct descnbed 'abOVe Within \
,

N.

Kl California, dlrectly or 1nd1rectly, sold and offered to sell: the unreglstered securrtles
In

,°°’

”-11-“. M .mtszg‘;
CLASS ACTION COMPLAINT
 1-

r—9

3"

24.9

.mmw-h

up).

\1'

.oo.;...

No
H57:

'-—'"1,

‘-iL-‘§

ll—d ~03

5
4N2:
3—"

m.
HE-..‘u—L“:,

OYI,"

,)—-‘
‘\l

r—d'

00

:2

1—5 \O
A

o
mm r—l.

N
NMCN

W'

4?.
N

NR)
oxu.

fiollovys:

27‘; A!
28 Class acuon, appomtmg plaintiff as a Class representatxve under California Rule of Court 3 764 3

‘
-12.;
CLASS ACTION COMPLAINTS: :.
 an appointing plaintiffs counsel as Class counsel;

B. Awarding damages in favor of plaintiff and the Class against all defendaiii

Awarding rescission or a rescissory measure of damages; and

E. Awarding equitable, injunctive or other relief, including disgorgemen

=‘;;4;U__..._.WRY DEMAND:
Plaintiff demands trial by juiy.

_. :fDate ‘June 5,2018 ROBBINS ARROYO LLP

BRIAN J. ROBBINS
STEPHEN J. ODDO
225.132.1310 M- CARE ,0

600‘33‘3S‘treeStite ‘1900
San Diego, CA 92101
Telephone: (61 9) 525—3 990
Facsimile: (619} 525 -3991
E—mail: brobbins@robbinsarroyo.com
soddo@robbinsarroyo.com
ecarrino@robbinsarroyo.com

ROBBINS GELLER RUDMAN

& DOWD LLP
SHAWN A. WELLIAMS (213113)
Post Montgomery Center
One Montgomery Street, Suite 1800
San Francisco, CA 94104
Telephone: (415) 288-4545
Facsimile: (415) 288-4534
E-mail: shawnw@rgrdlaw.com

DAVID C. WALTON (167268)

BRIAN O. O'MARA (229737)
BRIAN E. COCHRAN (286202)
655 West Broadway, Suite 1900

“
, ,,;:_ 2;, '
. 7‘ :13? , :Is-z- , 2 :i,:i,:-}i=:,2;,, :3
CLASS‘ACTI‘ONCOMPLAINT“"“‘W‘i"
 San Diego, CA 92101
Telephone: (6:9) 23 1-105 8
Facsimile: (619) 231-7423
E-mail: davew@rgrdlaw.com
bomara@rgrdlaw. com
lolts@rgrdlaw.com
bcochran@rgrdlaw.com

Attorneys for Plaintiff

:
12685432; :

" ..2 '~ " 14

,A ‘.r‘ "V'
u . . ‘ ‘2:‘~ .. “ ..;,“~.(_Z:“;;.2 ' :9 ‘ \.
' “““
CLASS ACTION COMPLAINT“
~~ 1