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Ripple Sued by One of Its Major Investors Demanding The Blockchain Firm Reclaim Its Stock

Things look grim for Ripple as Tetragon, a former investor in the company, has turned against it, filing a complaint against the fintech firm.

UK investment company Tetragon Financial Group Ltd. issued an official complaint against Ripple with Delaware Chancery Court. The financial firm has been a major investor in Ripple’s $200 million Series C round in 2019 but has decided to pursue Ripple in court, shadowing the Securities and Exchange Commission’s lawsuit against Ripple for unregistered securities offering through XRP. The Commission alleges that XRP should be classified as a security and that Ripple has violated the Securities Act of 1933 by profiting from XRP sales, reaping $1.3 billion in profit.

In Tetragon’s complaint, it demanded that Ripple reclaim its equity under the Series C investment agreement with Tetragon and asked that Ripple’s assets and liquidity be frozen until a payment has been issued. Under the Series C investment agreement, if XRP is considered a security, Ripple is required by law to redeem their Ripple equity held by Tetragon, if the latter demands it.

Additionally, Tetragon has requested for a temporary restraining order, a preliminary injunction, as well as an expedited trial against Ripple, according to Bloomberg.

Ripple says the lawsuit has no merit

Ripple has addressed the lawsuit, and argued that the lawsuit had no basis, as a conclusion has not yet been reached in court to place XRP definitively in the securities basket.

It explained, “In Ripple’s Series C investment agreement, there is a provision that if XRP is deemed to be a security on a go forward basis, then Tetragon has the option of having Ripple redeem their Ripple equity.” As a conclusion has not yet been reached by the SEC lawsuit alleging XRP is a security, Ripple said that Tetragon’s lawsuit had “no merit.”

XRP loses Grayscale Investments’ support

Rather, the fintech firm expressed its disappointment in its affiliate, saying that Tetragon was taking advantage of the fact that there was a lack of regulatory clarity in the US to strong-arm Ripple.

XRP’s outlook remains fairly uncertain, as its operations inside the US may be inhibited by the Securities and Exchange Commission’s lawsuit. Currently, it has been unseated as the third-largest cryptocurrency by market capitalization by Litecoin, as it continues decreasing in value. Many leading crypto exchanges and funds have moved to delist XRP, with Grayscale being the latest one.

Grayscale recently removed all XRP from its portfolio, following a quarterly review. It announced that it will allocate the cash proceeds from XRP sales to re-weight its digital asset portfolio.

Currently, Grayscale’s digital asset portfolio holds 81.63% of Bitcoin (BTC), 15.86% of Ethereum (ETH), 1.43% of Litecoin (LTC), and 1.08% of Bitcoin Cash (BCH).

Ripple Handed a Temporary Restraining Order Limiting XRP Sales until Investor Tetragon Has Sold Back Its Shares

After a court ruling, a temporary restraining order has been issued against Ripple limiting its XRP sales. The firm has been ordered to maintain a “net zero” position in sales and purchases of XRP, until its former investor Tetragon is able to liquidate its Ripple shares.

The Delaware Chancery Court’s temporary restraining order to limit XRP sales comes as Ripple’s former investor, Tetragon has decided to sue the fintech firm, filing for a temporary restraining order, a preliminary injunction, and an expedited trial. Through its official complaint, Tetragon insists that Ripple should reclaim its equity and that the XRP-associated company should have their assets and liquidity frozen until a payment is made.

The Series C investment agreement was brought up in the complaint, an agreement stating that if XRP was considered a security, Ripple was required by law to redeem their equity held by Tetragon, if the latter requested it. However, after the court hearing, the vice Chancellor concluded that Tetragon’s request to completely freeze XRP purchases was too “heavy-handed.” Instead, the court issued an order requiring Ripple to maintain a net zero position in XRP sales and purchases, instead of “halting acquisitions outright.” Ripple must maintain a zero balance in terms of XRP transactions, whether it involves trades or XRP buy-backs.

Ripple’s ability to conduct XRP transactions or redeem shares is therefore limited until Tetragon has managed to sell back all of its shares.

XRP under SEC scrutiny for being a security

As the Securities and Exchange Commission’s lawsuit against Ripple for selling XRP as an unregistered security has not yet been concluded, the logic behind the Delaware Chancery Court ruling seems to be that the SEC’s ruling needs to have happened first.

Previously, Ripple CEO Brad Garlinghouse had said that it was unfortunate that Tetragon, a shareholder of Ripple who owns 1.5% of it, was “seeking to unfairly advantage itself through the SEC’s allegations.”

Tetragon first filed a preliminary injunction at the beginning of the month, referring to the Series C clause that obliged Ripple to redeem its equity if XRP was classified as a security. However, Ripple refuted the claims, arguing that the lawsuit had no merit as the SEC ruling had not conclusively placed XRP as a security.

The issue of classifying XRP as a security has been deemed preposterous by Ripple’s CEO, who pointed out that the US was the only G20 member to classify the token as such.

Ripple Blasted by Investor Tetragon for Playing “Word Games” in $175M Stock Buyback Lawsuit

Along with the heat Ripple is currently facing from the Securities and Exchange Commission, one of its lead investors has also turned against it.

Currently, Tetragon is suing Ripple to force it to redeem its stock. The multi-billion asset manager, which initially led Ripple’s $200 million Series C funding round in 2019, has now joined the SEC in pursuing the fintech firm in court. In a lawsuit filed with the Delaware Chancery Court, Tetragon has asserted that it was rightfully entitled to demand that Ripple redeems its equity under the agreement pre-established in the Series C clause.

Under the clause, an agreement was made between both firms that if XRP was deemed a security, Tetragon would be allowed to demand a stock redemption and a refund from Ripple. The latter has currently claimed that Tetragon’s current lawsuit had no merits since the court has not officially ruled XRP as a security.

In an official report, Tetragon’s legal team accused Ripple of playing “word games” to circumvent a potential order from the Delaware Chancery Court to halt its cryptocurrency transactions until it reclaims Tetragon’s $175 million stock originating from Ripple. Tetragon attorney Michael Shuster accused Ripple of misrepresenting the previous agreement between both parties.

Tetragon’s plea with the Delaware Chancery Court to freeze Ripple’s liquidity completely until a reimbursement has been made has resulted in a temporary restraining order against the fintech firm. Currently, Ripple is to limit its XRP sales by maintaining a net zero position in sales and purchases of XRP, until Tetragon is able to liquidate its Ripple shares.

The tension has been increasing for Ripple, as its pretrial looms and many legal experts have speculated on the outcome of the SEC case.

With the first court date set for February 22, the SEC and Ripple have informed the court through a joint letter that a settlement was not going to happen, at least for the time being. Attorney Jeremy Hogan had previously commented on the letter, remarking that Ripple’s arguments in the letter were well presented and stronger than that of the SEC.

It has been two months since the SEC has slapped Ripple Labs with a lawsuit for XRP. The Commission accuses Ripple and its executives of selling unregistered securities with XRP. Whether XRP will be ruled as a security by the US court will be a crucial turning point for the cryptocurrency industry as a whole, as it may pave the way for how other digital currencies are classified in the country.

Ripple Investor’s Request to Recuperate Its $175M Stock Investment Is Denied by the Court

The Delaware court has ruled that Ripple’s investor Tetragon will not be able to reclaim its Ripple equity in cash.

Earlier this year, one of Ripple’s main investors, UK-based Tetragon Financial Group Ltd., filed a lawsuit against the firm.

It demanded a reimbursement from Ripple for the $200 million Series C investment round it led for the blockchain startup, through which it invested $175 million in the blockchain startup. In addition to requesting for an equity redemption, Tetragon also demanded that Ripple’s assets and liquidity be frozen until a payment has been made.

The lawsuit came as Ripple has been actively fending off the Securities and Exchange Commission’s lawsuit over XRP being an unregulated security. Per Ripple and Tetragon’s shareholder agreement, if XRP was deemed a security, Tetragon had “the option of having Ripple redeem their Ripple equity.”

Currently, the Delaware court has rejected Tetragon’s request under the pretext that XRP’s status remains unsettled. Ripple will therefore not have to redeem the $175 million stock investment. Per the official filing by the Delaware court:

“XRP is no more a security after the SEC filed the enforcement action than it was before it. The enforcement action, by contrast, asks that question. The question is not yet resolved, so a determination has not yet been made.”

Ripple responds to Tetragon shareholder’s lawsuit

Following the court’s decision, Ripple responded and called Tetragon’s lawsuit “an opportunistic move to take advantage of the SEC’s allegations” that XRP should be considered an unregistered security. Ripple’s official statement read:

“Let’s call Tetragon’s lawsuit what it is — an opportunistic move to take advantage of the SEC’s allegations. What has always been clear (and made so even more today) is that the SEC still has to try to prove their case in Court; which we do not believe they will be able to do.”

Ripple added that the SEC was “dead wrong!”

Ripple CEO Brad Garlinghouse also came forward and addressed Tetragon’s lawsuit. He said that the SEC’s lawsuit has wreaked havoc by funnelling more uncertainty into the crypto market. He said,

“This is why regulation by enforcement wreaks such havoc. By bringing a massive enforcement case, the SEC acknowledges they didn’t ‘determine’ anything, but the crypto markets – under pressure – interpreted the filing as such, causing massive damage to retail holders.”