tag:blogger.com,1999:blog-125749362024-03-12T19:56:06.393-07:00XRP Ninjar0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.comBlogger243125tag:blogger.com,1999:blog-12574936.post-1058637335386558172021-09-21T12:49:00.001-07:002021-09-21T12:50:29.424-07:00Send $SGB (Songbird) to another wallet using a scriptYou need nodejs and web3 to run it: <div><pre>const Web3 = require('web3');
// Variables definition
const privKey =
'8xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx2'; // Genesis private key
const addressFrom = '0xAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA';
const addressTo = '0xBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB';
const web3 = new Web3('https://songbird.towolabs.com/rpc');
// Create transaction
const deploy = async () => {
console.log(
`Attempting to make transaction from ${addressFrom} to ${addressTo}`
);
const createTransaction = await web3.eth.accounts.signTransaction(
{
from: addressFrom,
to: addressTo,
value: web3.utils.toWei('1', 'ether'), // Send 1 SGB. 'ether' is not a typo here.
gasPrice: web3.utils.toWei('225', 'Gwei'),
gas: '21000',
},
privKey
);
// Deploy transaction
const createReceipt = await web3.eth.sendSignedTransaction(
createTransaction.rawTransaction
);
console.log(
`Transaction successful with hash: ${createReceipt.transactionHash}`
);
};
deploy();
</pre></div>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-78318887479635333842021-04-12T12:47:00.003-07:002021-04-12T12:47:47.212-07:00Rippled thread cpu usage<p>The cpu usage of <a href="https://livenet.xrpl.org/validators/nHBTqw7vwjqrSMruoQNYmSXcrBmQHDquG7jgvrsQpurGaVELqdNx/">xrp.ninja</a> validator spikes every 2 hours. I always wonder what it is doing during the spikes. So I wrote a script to report the thead cpu usage to a statsd server. </p><p>I started statsd/graphite/grafana using <a href="https://github.com/ripple/rippledmon">https://github.com/ripple/rippledmon</a></p><p>Then I wrote this script:</p>
<pre>#!/usr/bin/python3
import collections
import itertools
import os
import re
import statsd
import subprocess
import time
HEADER = b'%CPU COMMAND'
STATSD = 'XXX'
PORT = 'YYY'
PREFIX = 'rippled.threads'
TOP = 'env HOME={0} top -b -n 1 -p $(pgrep rippled) -H'.format(os.getcwd())
def report(c, jobs):
p = subprocess.run(TOP, shell=True, stdout=subprocess.PIPE,
stderr=subprocess.PIPE)
if p.returncode != 0:
print(p.stderr)
return
m = collections.defaultdict(float)
for line in itertools.dropwhile(lambda x: x != HEADER, p.stdout.splitlines()):
if line == HEADER:
continue
usage, comm = line.decode().strip().split(' ', 1)
if usage == '0.0':
break
comm = re.sub(r'(:|\s|#|\.)+', '_', comm)
m[comm] += float(usage)
if comm not in jobs:
jobs.add(comm)
m['sum'] = sum(m.values())
with c.pipeline() as pipe:
for comm in jobs:
if comm in m:
pipe.gauge(comm, int(m[comm] + 0.5))
else:
pipe.gauge(comm, 0)
def main():
c = statsd.StatsClient(STATSD, PORT, prefix=PREFIX)
jobs = {'sum'}
while True:
report(c, jobs)
time.sleep(1)
if __name__ == '__main__':
main()
</pre>
<p>This script uses top command to report thread cpu usage. I created a toprc which only shows cpu usage and command name (thread name if -H is used) and put the toprc in a different directory than $HOME and run the script in that directory.</p><p>The result shows SHAMapStore is the culprit.<br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-e6oFJStSipI/YHSigdVFy-I/AAAAAAAAqs4/cWhrb0MNIRAgSwoaRW8K1nPG4EIrgPiUwCLcBGAsYHQ/s1103/Screenshot%2Bfrom%2B2021-04-12%2B11-43-57.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="659" data-original-width="1103" height="292" src="https://1.bp.blogspot.com/-e6oFJStSipI/YHSigdVFy-I/AAAAAAAAqs4/cWhrb0MNIRAgSwoaRW8K1nPG4EIrgPiUwCLcBGAsYHQ/w636-h292/Screenshot%2Bfrom%2B2021-04-12%2B11-43-57.png" width="636" /></a></div>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-72921655379850730842021-02-18T18:49:00.002-08:002021-02-18T18:49:22.671-08:00The diff between the original SEC complaint against Ripple and the amended one<p><span style="color: #7f7f7f; font-family: "Courier New"; font-size: 10pt; font-weight: bold;">--- original.txt 2021-02-18 18:32:43.171832036 -0800<br /></span><span style="color: #7f7f7f; font-family: "Courier New"; font-size: 10pt; font-weight: bold;">+++ amended.txt 2021-02-18 18:32:29.103735165 -0800</span></p><pre style="font-family: "Courier New"; font-size: 10pt;"><span style="color: #00cdcd;">@@ -1,4 +1,4 @@</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 1 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 1 of 79</span>
Richard Best
Kristina Littman
<span style="color: #00cdcd;">@@ -34,9 +34,9 @@</span>
:
------------------------------------------------------------------------x
<span style="color: #cd0000;">-20 Civ. 10832</span>
<span style="color: #00cd00;">+20 Civ. 10832 (AT)</span>
ECF Case
<span style="color: #cd0000;">-Complaint</span>
<span style="color: #00cd00;">+First Amended Complaint</span>
Jury Trial Demanded
Plaintiff Securities and Exchange Commission (the “SECâ€), for its Complaint against
<span style="color: #00cdcd;">@@ -53,7 +53,7 @@</span>
required by the federal securities laws, and no exemption from this requirement applied.
1
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 2 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 2 of 79</span>
2.
<span style="color: #00cdcd;">@@ -103,7 +103,7 @@</span>
2
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 3 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 3 of 79</span>
VIOLATIONS
9.
<span style="color: #00cdcd;">@@ -150,7 +150,7 @@</span>
3
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 4 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 4 of 79</span>
15.
<span style="color: #00cdcd;">@@ -193,7 +193,7 @@</span>
4
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 5 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 5 of 79</span>
20.
<span style="color: #00cdcd;">@@ -243,7 +243,7 @@</span>
5
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 6 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 6 of 79</span>
27.
<span style="color: #00cdcd;">@@ -287,7 +287,7 @@</span>
6
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 7 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 7 of 79</span>
through which a person invests money in a common enterprise and reasonably expects profits or
returns derived from the entrepreneurial or managerial efforts of others. Courts have found that
<span style="color: #00cdcd;">@@ -331,7 +331,7 @@</span>
7
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 8 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 8 of 79</span>
ledger, such as helping secure the ledger from manipulation or other forms of attacks. Like other
“digital tokens,†native tokens may also be sold and traded for consideration.
<span style="color: #00cdcd;">@@ -383,7 +383,7 @@</span>
8
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 9 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 9 of 79</span>
43.
<span style="color: #00cdcd;">@@ -442,7 +442,7 @@</span>
9
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 10 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 10 of 79</span>
52.
<span style="color: #00cdcd;">@@ -492,7 +492,7 @@</span>
10
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 11 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 11 of 79</span>
59.
<span style="color: #00cdcd;">@@ -538,7 +538,7 @@</span>
11
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 12 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 12 of 79</span>
currency,†that it would “keep between 25% to 30%†of XRP, and noted the “record highs†of
prices other digital assets had achieved as something Ripple hoped to emulate for XRP.
<span style="color: #00cdcd;">@@ -586,7 +586,7 @@</span>
12
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 13 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 13 of 79</span>
69.
<span style="color: #00cdcd;">@@ -624,29 +624,38 @@</span>
Garlinghouse joined Ripple as COO in April 2015 and substantially assisted its
<span style="color: #cd0000;">-ongoing unregistered Offering by, among other things, being responsible for its operations. In</span>
<span style="color: #cd0000;">-January 2017, Garlinghouse became CEO and Larsen retained his role as chairman of the Board.</span>
<span style="color: #00cd00;">+ongoing unregistered Offering by, among other things alleged here, being responsible for its</span>
<span style="color: #00cd00;">+operations. In January 2017, Garlinghouse became CEO and Larsen retained his role as chairman</span>
<span style="color: #00cd00;">+of the Board.</span>
75.
After the change in corporate structure, both Garlinghouse and Larsen remained key
<span style="color: #cd0000;">-decision makers and participants in Ripple’s ongoing Offering. As CEO, Garlinghouse approved</span>
<span style="color: #cd0000;">-the timing and amounts of unregistered offers and sales of XRP, and, as chairman of the Board,</span>
<span style="color: #cd0000;">-Larsen was consulted on such offers and sales. Both continue to communicate with potential and</span>
<span style="color: #00cd00;">+decision makers and participants in, and continued to direct, Ripple’s ongoing Offering. As Ripple</span>
<span style="color: #00cd00;">+explained in June 2018 to a New York-based investment firm when the firm was considering the</span>
13
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 14 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 14 of 79</span>
<span style="color: #cd0000;">-actual XRP investors and Ripple equity shareholders and to participate in certain projects Ripple is</span>
<span style="color: #cd0000;">-pursuing with respect to XRP. Both have continued selling XRP into public markets.</span>
<span style="color: #00cd00;">+creation of an XRP-based fund, the “XRP Sales Committee consisting of Brad Garlinghouse (CEO),</span>
<span style="color: #00cd00;">+Chris Larsen (Co-founder and Executive Chairman)†and two other individuals at Ripple “make[ ]</span>
<span style="color: #00cd00;">+XRP distribution and sales decisions at the company . . . .â€</span>
76.
<span style="color: #00cd00;">+As CEO, Garlinghouse approved the timing and amounts of unregistered offers and</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+sales of XRP, and, as chairman of the Board, Larsen was consulted on such offers and sales. Both</span>
<span style="color: #00cd00;">+continue to communicate with potential and actual XRP investors and Ripple equity shareholders</span>
<span style="color: #00cd00;">+and to participate in certain projects Ripple is pursuing with respect to XRP. Both have continued</span>
<span style="color: #00cd00;">+selling XRP into public markets.</span>
<span style="color: #00cd00;">+77.</span>
<span style="color: #00cd00;">+</span>
In 2017, Defendants also began accelerating Ripple’s sales of XRP because, while
Ripple’s expenses continued to increase (reaching nearly $275 million for 2018), its revenue outside
of XRP sales did not.
<span style="color: #cd0000;">-77.</span>
<span style="color: #00cd00;">+78.</span>
For example, starting in 2016, Ripple began selling two software suites, xCurrent and
<span style="color: #00cdcd;">@@ -658,70 +667,76 @@</span>
Overview of Ripple’s XRP Distribution
<span style="color: #cd0000;">-78.</span>
<span style="color: #00cd00;">+79.</span>
Ripple’s planned distribution of XRP succeeded.
<span style="color: #cd0000;">-79.</span>
<span style="color: #00cd00;">+80.</span>
From 2014 through the end of 2019, to fund its operations, Ripple sold at least 3.9
billion XRP through Market Sales for approximately $763 million USD.
<span style="color: #cd0000;">-80.</span>
<span style="color: #00cd00;">+81.</span>
From 2013 through the end of the third quarter of 2020, Ripple sold at least 4.9
billion XRP through Institutional Sales for approximately $624 million USD, also to fund Ripple’s
operations, for a total of at least $1.38 billion USD in Market and Institutional Sales alone.
<span style="color: #cd0000;">-81.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+14</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 15 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+82.</span>
The market price for XRP—and Ripple’s sales prices in the Offering—ranged from
a low price of approximately $0.002 per XRP in 2014 to a high price of $3.84 per XRP in early 2018,
an increase of nearly 137,000%. XRP traded at approximately $0.58 USD per XRP as of last week.
<span style="color: #cd0000;">-82.</span>
<span style="color: #00cd00;">+83.</span>
Ripple also undertook to achieve its goal of widespread distribution of XRP by
exchanging XRP for non-cash consideration, such as labor and market-making services. Through
the Other XRP Distributions, Ripple paid third parties to assist in its efforts to accomplish as
widespread a distribution of XRP as possible and to attempt to develop a “use†for XRP.
<span style="color: #00cd00;">+84.</span>
<span style="color: #cd0000;">-14</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 15 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-83.</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Since 2014, Defendants have disbursed at least 4.05 billion XRP (valued at at least</span>
<span style="color: #00cd00;">+Since 2014, Defendants have disbursed at least 4.05 billion XRP (valued at least $500</span>
<span style="color: #cd0000;">-$500 million USD when the XRP was distributed) through Other XRP Distributions.</span>
<span style="color: #cd0000;">-84.</span>
<span style="color: #00cd00;">+million USD when the XRP was distributed) through Other XRP Distributions.</span>
<span style="color: #00cd00;">+85.</span>
In addition, Larsen (beginning in 2015) and Garlinghouse (beginning in 2017)
directly participated in the Offering by offering and selling their own holdings of XRP into the same
market as Ripple’s Market Sales, typically following the same manner of sale.
<span style="color: #cd0000;">-85.</span>
<span style="color: #00cd00;">+86.</span>
From 2015 through at least March 2020, while Larsen was an affiliate of Ripple as its
CEO and later chairman of the Board, Larsen and his wife sold over 1.7 billion XRP to public
investors in the market. Larsen and his wife netted at least $450 million USD from those sales.
<span style="color: #cd0000;">-86.</span>
<span style="color: #00cd00;">+87.</span>
<span style="color: #cd0000;">-From April 2017 through December 2019, while an affiliate of Ripple as CEO,</span>
<span style="color: #00cd00;">+From April 2017 through at least October 2020, while an affiliate of Ripple as CEO,</span>
<span style="color: #cd0000;">-Garlinghouse sold over 321 million XRP he had received from Ripple to public investors in the</span>
<span style="color: #cd0000;">-market, generating approximately $150 million USD from those sales.</span>
<span style="color: #cd0000;">-87.</span>
<span style="color: #00cd00;">+Garlinghouse sold over 357 million XRP he had received from Ripple to public investors in the</span>
<span style="color: #00cd00;">+market, generating approximately $159 million USD from those sales (with Larsen’s sales, the</span>
<span style="color: #00cd00;">+“Individual Defendants’ XRP Salesâ€).</span>
<span style="color: #00cd00;">+88.</span>
Defendants offered and sold XRP to any person, without restricting offers or sales
to persons who had a “use†for XRP (particularly given that little to no “use†existed until Ripple
subsidized some “use†operations in recent months, as described below) and without restricting
anyone’s ability to resell their XRP to investors within the United States or elsewhere.
<span style="color: #cd0000;">-88.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+15</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 16 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+89.</span>
With respect to all four types of distribution (Market Sales, Institutional Sales, Other
<span style="color: #00cdcd;">@@ -729,13 +744,15 @@</span>
purchasers routinely resold XRP to other investors in the United States and other countries. These
resales aligned with Defendants’ own goals of achieving as widespread a distribution of XRP as
possible, which was necessary to promote an aftermarket of buyers and sellers of XRP.
<span style="color: #cd0000;">-89.</span>
<span style="color: #00cd00;">+90.</span>
<span style="color: #cd0000;">-Defendants sold approximately 14.6 billion XRP, as summarized in Table 1, below.</span>
<span style="color: #00cd00;">+At all relevant times, Garlinghouse and Larsen knew or recklessly disregarded that</span>
<span style="color: #cd0000;">-15</span>
<span style="color: #00cd00;">+investors were using money to purchase XRP and that Ripple was pooling that capital to fund its</span>
<span style="color: #00cd00;">+efforts to create profits for Ripple and XRP purchasers (in the form of increased prices for XRP).</span>
<span style="color: #00cd00;">+91.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 16 of 71</span>
<span style="color: #00cd00;">+Defendants sold approximately 14.6 billion XRP, as summarized in Table 1, below.</span>
Type of Sales
<span style="color: #00cdcd;">@@ -758,7 +775,7 @@</span>
Individual Defendants’ XRP Sales – Garlinghouse
<span style="color: #cd0000;">-321 million*</span>
<span style="color: #00cd00;">+357 million*</span>
Total Offering
<span style="color: #00cdcd;">@@ -770,28 +787,33 @@</span>
Defendants’ Market Sales of XRP
<span style="color: #cd0000;">-90.</span>
<span style="color: #00cd00;">+92.</span>
As CEO, Larsen initiated and approved Ripple’s Market Sales of XRP.
<span style="color: #cd0000;">-91.</span>
<span style="color: #00cd00;">+93.</span>
Ripple conducted the Market Sales first by transferring ownership of XRP on the
XRP Ledger directly to investors and later by using traders who specialized in algorithmic digital
asset trading to offer and sell XRP to investors, both on the XRP Ledger and on digital asset trading
platforms, both in exchange for fiat currencies or other digital assets such as bitcoin.
<span style="color: #cd0000;">-92.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+16</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 17 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+94.</span>
The entities Defendants enlisted to help carry out the Market Sales—the specialized
traders or the trading platforms—were typically not registered with the SEC in any capacity.
<span style="color: #cd0000;">-93.</span>
<span style="color: #00cd00;">+95.</span>
Ripple conducted the Market Sales by paying at least four entities commissions, paid
in XRP, for executing Ripple’s XRP sales to the public on digital asset trading platforms.
<span style="color: #cd0000;">-94.</span>
<span style="color: #00cd00;">+96.</span>
One of these entities is based in New York and was registered with the SEC as a
<span style="color: #00cdcd;">@@ -799,89 +821,105 @@</span>
while another entity is internationally-based but has offices in the United States. The fourth entity,
through which Ripple conducted most of the Market Sales, is a global digital asset trading firm with
an office in the United States (the “Market Makerâ€).
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-16</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 17 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-95.</span>
<span style="color: #00cd00;">+97.</span>
To increase Market Sales throughout the Offering, Ripple has also directed all
readers of its website to information about “How to Buy XRP†and has provided a list of digital
asset trading platforms, including some with principal places of business in the United States, on
which investors can make those purchases.
<span style="color: #cd0000;">-96.</span>
<span style="color: #00cd00;">+98.</span>
While each was CEO, Larsen and Garlinghouse had final decision-making authority
over which trading venues to use for Market Sales and how much XRP to sell on a particular venue,
which Ripple communicated to traders as an overall percentage of XRP’s daily trading volume.
<span style="color: #cd0000;">-97.</span>
<span style="color: #00cd00;">+99.</span>
At Ripple’s direction, the intermediaries such as the Market Maker ensured that
Market Sales were programmatically set not to exceed a certain percentage of XRP’s overall daily
trading volume, and Ripple referred to the Market Sales as “programmatic sales.â€
<span style="color: #cd0000;">-98.</span>
<span style="color: #00cd00;">+100.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Ripple employees or the Market Marker specifically sought Larsen’s and</span>
<span style="color: #cd0000;">-On occasion, Ripple employees or the Market Marker consulted Larsen and</span>
<span style="color: #00cd00;">+Garlinghouse’s approval as to parameters for conducting Ripple’s Market Sales. For example, in</span>
<span style="color: #00cd00;">+mid-December 2015, Ripple’s then-Chief Financial Officer (the “CFOâ€) emailed Larsen and</span>
<span style="color: #00cd00;">+Garlinghouse with daily updates regarding the market price and volume of XRP and how they</span>
<span style="color: #00cd00;">+impacted Ripple’s Market Sales strategy. The CFO informed Larsen and Garlinghouse that the</span>
<span style="color: #cd0000;">-Garlinghouse as to parameters for conducting Ripple’s Market Sales, which they at times approved.</span>
<span style="color: #00cd00;">+17</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 18 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Market Sales had been paused due to a drop in XRP price but suggested the following day that the</span>
<span style="color: #00cd00;">+sales be restarted. Larsen instead instructed the CFO to “keep paused for now†and “[w]ait until</span>
<span style="color: #00cd00;">+[the] market had recovered from this mistake.†That afternoon, the CFO indicated that the XRP</span>
<span style="color: #00cd00;">+price had remained stable that day and suggested re-starting Market Sales the following day, a</span>
<span style="color: #00cd00;">+proposal that Larsen then approved.</span>
<span style="color: #00cd00;">+101.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Similarly, in April 2016, the CFO emailed Larsen and Garlinghouse regarding</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+continued “downward pressure on the price of XRP†and suggested having the Market Maker</span>
<span style="color: #00cd00;">+“adjust down a bit our net sell target for a few days to see if we can help stabilize and/or increase</span>
<span style="color: #00cd00;">+the XRP price.†Larsen responded, “Yes – let’s adj[ust],†while Garlinghouse stated that he was “in</span>
<span style="color: #00cd00;">+favor of†adjustment but was “marginally inclined to be more aggressive when we do this.â€</span>
D.
Defendants’ Public Distribution through Institutional Sales of XRP
<span style="color: #cd0000;">-99.</span>
<span style="color: #00cd00;">+102.</span>
Since at least 2013, Ripple and Larsen tried to make Institutional Sales to obtain
essential funding for Ripple’s operations and develop a speculative trading market in XRP.
<span style="color: #cd0000;">-100.</span>
<span style="color: #00cd00;">+103.</span>
Ripple viewed the Institutional Sales as the lynchpin of its strategy to generate
speculative interest in XRP from public investors. As Ripple stated in a document published on its
website on January 24, 2017, which Ripple Agent-2 authored, Ripple’s Institutional Sales of XRP
were “indicative of [XRP’s] broader capital market potential.â€
<span style="color: #cd0000;">-101.</span>
<span style="color: #00cd00;">+104.</span>
Ripple—through its agents, including Larsen and Garlinghouse—offered and sold
XRP for investment to influential players in the digital asset space, including XRP market makers,
dealers, and blockchain-focused private investment funds looking to create an XRP-based fund or
include XRP in their fund. These market makers were also typically not registered with the SEC.
<span style="color: #00cd00;">+105.</span>
<span style="color: #cd0000;">-17</span>
<span style="color: #00cd00;">+With a few exceptions, Ripple conducted the Institutional Sales through XRP II,</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 18 of 71</span>
<span style="color: #00cd00;">+which applied for a license with the NYDFS to engage in the “virtual currency business activity†of</span>
<span style="color: #cd0000;">-102.</span>
<span style="color: #00cd00;">+18</span>
<span style="color: #cd0000;">-With a few exceptions, Ripple conducted the Institutional Sales through XRP II,</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 19 of 79</span>
<span style="color: #cd0000;">-which applied for a license with the NYDFS to engage in the “virtual currency business activity†of</span>
selling “units of Ripple’s virtual currency . . . to institutional and other accredited investors†who are
“purchasing XRP for speculative purposes.â€
<span style="color: #cd0000;">-103.</span>
<span style="color: #00cd00;">+106.</span>
From 2013 to the present, Ripple has made Institutional Sales to at least twenty-six
institutional investors.
<span style="color: #cd0000;">-104.</span>
<span style="color: #00cd00;">+107.</span>
Ripple made many of the XRP Institutional Sales at a discount from XRP market
prices. At least seven of the institutional investors—including some described below—bought XRP
<span style="color: #cd0000;">-at discounts between 4% and 30% to the market price</span>
<span style="color: #cd0000;">-105.</span>
<span style="color: #00cd00;">+at discounts between 4% and 30% to the market price.</span>
<span style="color: #00cd00;">+108.</span>
The agreements governing Ripple’s Institutional Sales typically provided no
restrictions on the buyer’s ability to resell XRP, provided only brief lock-up periods (during which
the investor could not resell its XRP) of typically three to twelve months, or limited the buyer’s
ability to resell quantities of XRP that could potentially lower XRP’s trading price.
<span style="color: #cd0000;">-106.</span>
<span style="color: #00cd00;">+109.</span>
In other words, Ripple expected that most, if not all, Institutional Sales buyers would
<span style="color: #00cdcd;">@@ -889,76 +927,127 @@</span>
that could be resold during any given time period. By selling at discounts to market prices, Ripple
incentivized these buyers to seek to sell their XRP into the public markets in order to realize what
was essentially a guaranteed profit.
<span style="color: #cd0000;">-107.</span>
<span style="color: #00cd00;">+110.</span>
<span style="color: #cd0000;">-The paragraphs below describe three examples of Institutional Sales.</span>
<span style="color: #00cd00;">+Larsen and Garlinghouse both played significant roles in negotiating and approving</span>
<span style="color: #cd0000;">-108.</span>
<span style="color: #00cd00;">+Ripple’s Institutional Sales and other offers and sales of XRP to institutional investors, including</span>
<span style="color: #00cd00;">+while Garlinghouse was COO.</span>
<span style="color: #00cd00;">+111.</span>
<span style="color: #cd0000;">-On June 12, 2017, Larsen and others employees met with an investment fund</span>
<span style="color: #00cd00;">+For example, in mid-2015, Garlinghouse negotiated an institutional investor’s</span>
<span style="color: #cd0000;">-(“Institutional Investor Aâ€), which Ripple Agent-2 described in a June 12, 2017 email to Ripple</span>
<span style="color: #cd0000;">-Agent-3 as “a $12B [$12 billion] alternative asset hedge fund based out of New York.â€</span>
<span style="color: #00cd00;">+purchase of XRP in connection with the investor’s formation of a “private investment fund†whose</span>
<span style="color: #00cd00;">+sole purpose would have been to speculate on XRP as an investment (“XRP Fund Aâ€). On July 10,</span>
<span style="color: #00cd00;">+2015, Garlinghouse emailed that potential investor a document—which Ripple had created in 2014</span>
<span style="color: #00cd00;">+(as described further below) and that Garlinghouse described to the potential investor as a “white</span>
<span style="color: #cd0000;">-18</span>
<span style="color: #00cd00;">+19</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 19 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 20 of 79</span>
<span style="color: #cd0000;">-109.</span>
<span style="color: #00cd00;">+paperâ€â€”entitled “The Ripple Protocol: A Deep Dive for Financial Professionals†(the “2014 Promotional</span>
<span style="color: #00cd00;">+Documentâ€). On August 3, 2015, Ripple, through XRP II, entered into a “Memorandum of</span>
<span style="color: #00cd00;">+Understanding†(which Larsen signed on XRP II’s behalf), committing Ripple to sell XRP to that</span>
<span style="color: #00cd00;">+investor for XRP Fund A. Around November 2015, Garlinghouse, Larsen, and others received</span>
<span style="color: #00cd00;">+drafts of the potential offering documents for XRP Fund A and provided comments on these</span>
<span style="color: #00cd00;">+documents.</span>
<span style="color: #00cd00;">+112.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+The paragraphs below describe three examples of Institutional Sales, certain of</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+which, as alleged, Larsen and Garlinghouse negotiated, approved, or signed on behalf of Ripple.</span>
<span style="color: #00cd00;">+113.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+On June 12, 2017, Larsen and others employees met with an investment fund</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+(“Institutional Investor Aâ€), which Ripple Agent-2 described in a June 12, 2017 email to Ripple</span>
<span style="color: #00cd00;">+Agent-3 as “a $12B [$12 billion] alternative asset hedge fund based out of New York.â€</span>
<span style="color: #00cd00;">+114.</span>
In 2017, Ripple sold approximately 14.8 million XRP for $2.1 million to Institutional
Investor A, without restricting Institutional Investor A’s ability to resell this XRP into public
markets in any way, at price discounts of up to 30% below XRP market prices.
<span style="color: #cd0000;">-110.</span>
<span style="color: #00cd00;">+115.</span>
From at least 2016 through 2019, Ripple sold approximately 115 million XRP to an
entity (“Institutional Investor Bâ€) that describes itself as a “full-service digital currency prime
broker†that “provide[s] investors with a secure marketplace to trade, borrow, lend & custody digital
currencies.†Institutional Investor B paid Ripple approximately $6.4 million for its XRP, the first
<span style="color: #cd0000;">-$500,000 of which it obtained at a 10% discount from XRP market prices.</span>
<span style="color: #cd0000;">-111.</span>
<span style="color: #00cd00;">+$500,000 of which it obtained in June 2016 at a 10% discount from XRP market prices.</span>
<span style="color: #00cd00;">+116.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+In an internal email on April 22, 2016, Ripple Agent-3 had sought Larsen’s and</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse’s approval to sell XRP to Institutional Investor B, which Ripple Agent-3 described as</span>
<span style="color: #00cd00;">+an “institutional reseller,†at a discount relative to current market conditions and with certain lockup restrictions. In response, Garlinghouse and Larsen both approved the sale—with each separately</span>
<span style="color: #00cd00;">+telling Ripple Agent-3 that they were “good with it.â€</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+20</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 21 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+117.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Around September 12, 2016, after Institutional Investor B’s initial purchase of XRP,</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse (as COO) and Ripple Agent-3 met with representatives for Institutional Investor B.</span>
<span style="color: #00cd00;">+118.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+An internal Ripple email memorializing this meeting shows that Institutional</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Investor B explained to Garlinghouse that its “purchase of XRP was simply a consequence of . . .</span>
<span style="color: #00cd00;">+Chris [Larsen] indicating XRP was central to Ripple’s success,†but that it would no longer</span>
<span style="color: #00cd00;">+“purchase more XRP†unless certain “prerequisites†were met. These included, among others,</span>
<span style="color: #00cd00;">+Ripple “mak[ing] it easier to trade XRP†by making it available on digital asset trading platforms,</span>
<span style="color: #00cd00;">+showing “metrics and charts that show XRP trending up and to the right,†and “[c]onsider[ing]</span>
<span style="color: #00cd00;">+moving [Ripple’s] XRP into escrow†to “guarantee distribution with a predictable and public</span>
<span style="color: #00cd00;">+schedule.†As Institutional Investor B explained to Garlinghouse, “[i]nvestors will not invest when</span>
<span style="color: #00cd00;">+they do not understand something,†which required a “clearly defined distribution plan†for XRP,</span>
<span style="color: #00cd00;">+without which “it [would] be difficult/impossible to attract new money to XRP.â€</span>
<span style="color: #00cd00;">+119.</span>
Under the terms of its agreement with Ripple, Institutional Investor B—whose
principal place of business is in Manhattan—agreed to resell its XRP subject to volume limitations
to be specified at the time of each subsequent purchase. Ripple did not restrict the entity’s ability to
resell XRP into the market in any other way.
<span style="color: #cd0000;">-112.</span>
<span style="color: #00cd00;">+120.</span>
On September 24, 2018, Ripple entered into an agreement (as amended,
<span style="color: #cd0000;">-“Institutional Investor C Sales Agreementâ€), signed by Garlinghouse with a Japanese entity</span>
<span style="color: #00cd00;">+“Institutional Investor C Sales Agreementâ€), signed by Garlinghouse, with a Japanese entity</span>
(“Institutional Investor Câ€) that describes itself as “operat[ing] sales and exchange service[s] of
crypto-assets to offer safe and secure transactions of crypto-assets for as many people as possible.â€
<span style="color: #cd0000;">-113.</span>
<span style="color: #00cd00;">+121.</span>
Pursuant to the Institutional Investor C Sales Agreement, Ripple agreed to make up
to $1 billion worth of XRP available for purchases to Institutional Investor C from November 1,
2018 through November 1, 2021, $800 million of which was offered at prices discounted between
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+21</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 22 of 79</span>
<span style="color: #00cd00;">+</span>
15% and 30% below XRP’s market price, depending on the total amount of XRP purchased by
Institutional Investor C.
<span style="color: #cd0000;">-114.</span>
<span style="color: #00cd00;">+122.</span>
Pursuant to the Institutional Investor C Sales Agreement, Institutional Investor C
agreed to limit the amount of its own “sales or transfers of XRP†to not exceed 10 basis points of
the average daily volume of XRP trading in the market (a basis point is .0001 or 1/100th of 1%).
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-19</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 20 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-115.</span>
<span style="color: #00cd00;">+123.</span>
From 2018 through the end of 2019, Ripple sold over $170 million worth of XRP,
approximately 719 million XRP, to Institutional Investor C, sold approximately 361 million XRP to
Institutional Investor C through the end of September 2020, and at least another 20 million XRP
around December 15, 2020.
<span style="color: #cd0000;">-116.</span>
<span style="color: #00cd00;">+124.</span>
Table 2 specifies the amounts Ripple raised in both Market and Institutional Sales:
<span style="color: #00cdcd;">@@ -1019,14 +1108,19 @@</span>
Defendants’ Other XRP Distributions and “Listing†of XRP on Digital Asset
Trading Platforms
<span style="color: #cd0000;">-117.</span>
<span style="color: #00cd00;">+125.</span>
At times, rather than directly selling XRP into the market to fund its operations,
Ripple funded its dual XRP market-creating and company financing goals by transferring XRP to
third parties as compensation. Ripple understood that these parties would in turn sell XRP into the
public markets (often explicitly dictating the terms under which the parties could make these sales).
<span style="color: #cd0000;">-118.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+22</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 23 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+126.</span>
These Other XRP Distributions consist of five other types of sales and distributions
<span style="color: #00cdcd;">@@ -1035,36 +1129,32 @@</span>
Executive Compensation Distributions
<span style="color: #cd0000;">-119.</span>
<span style="color: #00cd00;">+127.</span>
Between December 2016 and at least May 2019, Ripple granted certain of its
executives a total of approximately 900 million XRP in consideration for their labor as Ripple
employees, at least 597 million of which Ripple has already tendered to these executives.
<span style="color: #cd0000;">-20</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 21 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-120.</span>
<span style="color: #00cd00;">+128.</span>
On December 13, 2016, Ripple granted Ripple Agent-3 and Garlinghouse 150
million and 500 million XRP, respectively, in separately negotiated compensation agreements.
<span style="color: #cd0000;">-121.</span>
<span style="color: #00cd00;">+129.</span>
Ripple granted Garlinghouse an additional 250 million XRP on May 29, 2019.
<span style="color: #cd0000;">-122.</span>
<span style="color: #00cd00;">+130.</span>
Pursuant to the terms of these agreements, Ripple has transferred approximately 521
million XRP to Garlinghouse and approximately 76 million XRP to Ripple Agent-3, worth
<span style="color: #cd0000;">-approximately $246 million and $44 million, respectively, at the time of transfer.1</span>
<span style="color: #00cd00;">+approximately $246 million and $44 million, respectively, at the time of transfer. 1</span>
2.
On-Demand Liquidity Distributions
<span style="color: #cd0000;">-123.</span>
<span style="color: #00cd00;">+131.</span>
As described below, in late 2018 Ripple began to market a product (“On-Demand
<span style="color: #00cdcd;">@@ -1072,52 +1162,53 @@</span>
jurisdiction, transfer it to a separate destination, and sell XRP for the local fiat currency, to effect
cross-border payments. To encourage adoption of ODL, Ripple paid XRP to both the money
transmitting businesses and certain market makers that supported the product for their efforts.
<span style="color: #cd0000;">-124.</span>
<span style="color: #00cd00;">+132.</span>
Ripple chose to compensate these entities (which were not investors in XRP) with
XRP directly, understanding that they would monetize their fees by selling XRP into public markets.
<span style="color: #cd0000;">-125.</span>
<span style="color: #00cd00;">+133.</span>
From approximately December 2018 through July 2020, Ripple issued at least 324
million XRP as fees, rebates, and incentives to entities associated with ODL, without restricting the
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+These values are based on the weighted average of XRP’s closing price for a particular day,</span>
<span style="color: #00cd00;">+month, or quarter, as reported by the digital asset platform Coinmarketcap.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+1</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+23</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 24 of 79</span>
<span style="color: #00cd00;">+</span>
ability of these entities to resell the XRP received as incentives into public markets. This XRP was
valued at approximately $67 million at the time of Ripple’s payments.
<span style="color: #cd0000;">-126.</span>
<span style="color: #00cd00;">+134.</span>
These entities typically have resold all the XRP they have received from Ripple to
investors in the public markets, typically on the same day that they received the XRP from Ripple.
<span style="color: #cd0000;">-127.</span>
<span style="color: #00cd00;">+135.</span>
Ripple took no steps to ensure that these entities intended to hold XRP as an
investment. To the contrary, Ripple gave these entities XRP to sell into the public markets.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-1</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-These values are based on the weighted average of XRP’s closing price for a particular day,</span>
<span style="color: #cd0000;">-month, or quarter, as reported by the digital asset platform Coinmarketcap.</span>
<span style="color: #cd0000;">-21</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 22 of 71</span>
<span style="color: #cd0000;">-</span>
3.
Sales of XRP into the Market on Behalf of a Larsen-Established Entity and by Ripple-Funded
Projects.
(i)
<span style="color: #cd0000;">-128.</span>
<span style="color: #00cd00;">+136.</span>
RippleWorks
In 2015 and 2017, Ripple issued at least 2 billion XRP as contributions to
“RippleWorks,†an entity Larsen co-founded to invest in, among other things, XRP-related projects
<span style="color: #cd0000;">-to further Ripple’s goals of achieving widespread trading of XRP in the market.2</span>
<span style="color: #cd0000;">-129.</span>
<span style="color: #00cd00;">+to further Ripple’s goals of achieving widespread trading of XRP in the market. 2</span>
<span style="color: #00cd00;">+137.</span>
Larsen co-founded RippleWorks with another individual who would become its
<span style="color: #00cdcd;">@@ -1125,66 +1216,79 @@</span>
RippleWorks, and Ripple’s Board, including Larsen, approved giving 1 billion XRP to RippleWorks,
in part because the Board “believe[d] [RippleWorks] will help promote [Ripple’s] business.†On
February 1, 2017, Ripple committed an additional one billion XRP to RippleWorks.
<span style="color: #cd0000;">-130.</span>
<span style="color: #00cd00;">+138.</span>
RippleWorks worked to achieve Ripple’s own goal of widespread distributions of
XRP, with Larsen supervising RippleWorks’ sales of XRP into the market.
<span style="color: #cd0000;">-131.</span>
<span style="color: #00cd00;">+139.</span>
Ripple took no steps to ensure that RippleWorks intended to hold XRP as an
investment. To the contrary, Ripple gave XRP to RippleWorks so it would sell XRP into the public
markets and, from mid-2015 to the present, enlisted the Market Maker to sell approximately 693
million XRP to the public on RippleWorks’ behalf, for approximately $176 million.
<span style="color: #cd0000;">-132.</span>
<span style="color: #00cd00;">+In a November 21, 2019 tweet, Larsen explained that RippleWorks had “distribute[d]</span>
<span style="color: #00cd00;">+$25M+†to a number of ventures, which then presumptively resold the XRP into public markets.</span>
<span style="color: #cd0000;">-A November 11, 2016 email from the RippleWorks CEO to Larsen and</span>
<span style="color: #00cd00;">+2</span>
<span style="color: #cd0000;">-Garlinghouse exemplifies the relationship between the two entities. In the email, the RippleWorks</span>
<span style="color: #cd0000;">-CEO detailed RippleWorks’ “2016 Year End XRP selling†and “2017 XRP Sales†in order to</span>
<span style="color: #cd0000;">-“insure [sic] we are all on the same page and allow anyone to chime in with any different thoughts.â€</span>
<span style="color: #00cd00;">+24</span>
<span style="color: #cd0000;">-2</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 25 of 79</span>
<span style="color: #cd0000;">-In a November 21, 2019 tweet, Larsen explained that RippleWorks had “distribute[d]</span>
<span style="color: #cd0000;">-$25M+†to a number of ventures, which then presumptively resold the XRP into public markets.</span>
<span style="color: #cd0000;">-22</span>
<span style="color: #00cd00;">+140.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 23 of 71</span>
<span style="color: #00cd00;">+Larsen coordinated these sales with the Market Maker by directing and approving</span>
<span style="color: #cd0000;">-133.</span>
<span style="color: #00cd00;">+changes to RippleWorks’ XRP sales strategy. For example, various mid-2017 emails between Larsen</span>
<span style="color: #00cd00;">+and the Market Marker show that Larsen instructed the Market Maker to “restart†trading by one of</span>
<span style="color: #00cd00;">+its trading bots and that he asked the Market Maker to “monitor[ ] closely to ensure†that certain</span>
<span style="color: #00cd00;">+sales are “constructive to the market.â€</span>
<span style="color: #00cd00;">+141.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+A November 11, 2016 email from the RippleWorks CEO to Larsen and</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse exemplifies the relationship between the two entities. In the email, the RippleWorks</span>
<span style="color: #00cd00;">+CEO detailed RippleWorks’ “2016 Year End XRP selling†and “2017 XRP Sales†in order to</span>
<span style="color: #00cd00;">+“insure [sic] we are all on the same page and allow anyone to chime in with any different thoughts.â€</span>
<span style="color: #00cd00;">+142.</span>
Another example involves RippleWorks’ eventual investment into a fund that wished
<span style="color: #cd0000;">-to invest in digital assets (the “XRP Fundâ€) and Ripple’s “loan†of XRP to that fund so that it could</span>
<span style="color: #00cd00;">+to invest in digital assets (“XRP Fund Bâ€) and Ripple’s “loan†of XRP to that fund so that it could</span>
engage in market-making activities.
<span style="color: #cd0000;">-134.</span>
<span style="color: #00cd00;">+143.</span>
In an August 27, 2017 weekly update email, Ripple Agent-3 informed Garlinghouse
<span style="color: #cd0000;">-that the XRP Fund and Ripple had exchanged a term sheet.</span>
<span style="color: #cd0000;">-135.</span>
<span style="color: #00cd00;">+that XRP Fund B and Ripple had exchanged a term sheet.</span>
<span style="color: #00cd00;">+144.</span>
In an October 2, 2017 weekly update email, Ripple Agent-3 informed Garlinghouse
<span style="color: #cd0000;">-that Ripple was “evaluating setting up [an investment in the XRP Fund] through RippleWorks.â€</span>
<span style="color: #cd0000;">-136.</span>
<span style="color: #00cd00;">+that Ripple was “evaluating setting up [an investment in XRP Fund B] through RippleWorks.â€</span>
<span style="color: #00cd00;">+145.</span>
On November 1, 2017, Ripple Agent-3 informed Ripple Agent-2 that Ripple was
looking to “accelerate/prioritize XRP-beneficial announcements,†including potentially the
<span style="color: #cd0000;">-formation of the XRP Fund.</span>
<span style="color: #cd0000;">-137.</span>
<span style="color: #00cd00;">+formation of XRP Fund B.</span>
<span style="color: #00cd00;">+146.</span>
On November 11, 2017, a Ripple marketing executive asked Garlinghouse and
Ripple Agent-3 in an email if they could use an upcoming investment conference in Manhattan to
<span style="color: #cd0000;">-“push†the XRP Fund or the RippleWorks CEO “to close so we can announce.†The next day,</span>
<span style="color: #00cd00;">+“push†XRP Fund B or the RippleWorks CEO “to close so we can announce.†The next day,</span>
Ripple Agent-3 informed Garlinghouse that Ripple was “following up with [the RippleWorks CEO]
<span style="color: #cd0000;">-with some provisions [for the XRP Fund] to prevent harmful XRP behavior.â€</span>
<span style="color: #00cd00;">+with some provisions [for XRP Fund B] to prevent harmful XRP behavior.â€</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+25</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 26 of 79</span>
<span style="color: #00cd00;">+</span>
(ii) Third-Party Incentives Through “xPringâ€
<span style="color: #cd0000;">-138.</span>
<span style="color: #00cd00;">+147.</span>
From approximately April 2018 through August 2020, Ripple publicly marketed an
<span style="color: #00cdcd;">@@ -1193,19 +1297,14 @@</span>
goals of achieving widespread XRP distribution. Ripple called xPring “a new initiative by Ripple
that will invest in, incubate, acquire and provide grants to companies and projects run by proven
entrepreneurs†in hopes of achieving Ripple’s stated goal of working to develop a use for XRP.
<span style="color: #cd0000;">-139.</span>
<span style="color: #00cd00;">+148.</span>
Ripple used xPring as yet another way to get XRP into the hands of public investors
through conduits, while obtaining the added benefit of incentivizing third parties to help Ripple
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-23</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 24 of 71</span>
<span style="color: #cd0000;">-</span>
pursue its XRP goals. Ripple gave XRP to these entities so they would sell it into public markets
and took no steps to ensure that xPring-funded parties would not resell their XRP to the public.
<span style="color: #cd0000;">-140.</span>
<span style="color: #00cd00;">+149.</span>
For example, a November 1, 2018, two-year “Services and Marketing Agreementâ€
<span style="color: #00cdcd;">@@ -1215,7 +1314,7 @@</span>
provided that these additional parties agreed to abide by Ripple-mandated parameters for their XRP
trading volumes. By August 2020, Ripple had paid the entity at least 364 million XRP, of which the
entity had distributed 178 million to other parties, typically approved by Ripple.
<span style="color: #cd0000;">-141.</span>
<span style="color: #00cd00;">+150.</span>
Another such distribution included a November 8, 2018 agreement wherein Ripple
<span style="color: #00cdcd;">@@ -1224,16 +1323,21 @@</span>
that the company would seek to resell the XRP it received from Ripple, Ripple again required the
entity to agree to certain volume-related parameters to effect XRP sales into the market. Ripple
eventually transferred more than 163 million XRP to this entity.
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+26</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 27 of 79</span>
<span style="color: #00cd00;">+</span>
4.
The XRP Options
<span style="color: #cd0000;">-142.</span>
<span style="color: #00cd00;">+151.</span>
From January 2018 through December 2019, Ripple sold at least 1.63 billion XRP
when certain entities exercised options to buy XRP that Ripple had granted (the “Option Salesâ€).
<span style="color: #cd0000;">-143.</span>
<span style="color: #00cd00;">+152.</span>
In February 2016, Ripple granted “an option to purchase units of Ripple XRP†to a
<span style="color: #00cdcd;">@@ -1241,74 +1345,175 @@</span>
exchange for advisory services provided†to Ripple by Option Investor A’s founder. Ripple granted
options for up to one billion XRP as of January 1, 2014, at prices to be determined based on XRP’s
average market prices. The options are from January 1, 2018, and for each month thereafter, until
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-24</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 25 of 71</span>
<span style="color: #cd0000;">-</span>
March 1, 2022. Between 2018 and September 2020, Ripple’s sales to Option Investor A consisted
<span style="color: #cd0000;">-of at least 588 million XRP.</span>
<span style="color: #cd0000;">-144.</span>
<span style="color: #00cd00;">+of at least 588 million XRP. Larsen negotiated the arrangement with Option Investor A on Ripple’s</span>
<span style="color: #00cd00;">+behalf and ultimately signed the final agreement with Option Investor A.</span>
<span style="color: #00cd00;">+153.</span>
Separately, in 2016, Ripple entered into an agreement with an enterprise software
firm (“Option Investor Bâ€) based in Manhattan that gave the firm an option to buy up to 5 billion
XRP at a discounted price in exchange for efforts to help Ripple develop a “use†for XRP. The
amount of XRP available for purchase under the option was later reduced, and Option Investor B
<span style="color: #cd0000;">-purchased at least 1.04 billion XRP in 2019.3</span>
<span style="color: #00cd00;">+purchased at least 1.04 billion XRP in 2019. 3 Larsen signed the Memorandum of Understanding</span>
<span style="color: #00cd00;">+with Option Investor B in May 2016.</span>
5.
Payments to Digital Asset Trading Platforms to Support XRP’s Trading Market
<span style="color: #cd0000;">-145.</span>
<span style="color: #00cd00;">+154.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Starting in 2016 at the latest, while he was Ripple’s COO, Garlinghouse began to</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+oversee, direct, and lead Ripple’s efforts to make XRP available for purchasers to buy and sell on</span>
<span style="color: #00cd00;">+digital asset trading platforms incorporated in the United States and abroad.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+To pressure Option Investor B to sell back the option grant (which covered approximately</span>
<span style="color: #00cd00;">+5% of the XRP in existence at a reduced price), Ripple Agent-3 suggested to Ripple Agent-2 in an</span>
<span style="color: #00cd00;">+email on February 26, 2017 that Ripple make the option public. Ripple Agent-2 responded that it</span>
<span style="color: #00cd00;">+“would cause us some headaches . . . Better to keep it private.â€</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+3</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+27</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 28 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+155.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Ripple and Garlinghouse engaged in these efforts because they believed that making</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+XRP available on digital asset trading platforms was critical to their ability to sell XRP into the</span>
<span style="color: #00cd00;">+market at higher prices—or, as internal Ripple documents explained it, increased trading volume for</span>
<span style="color: #00cd00;">+XRP on digital asset trading platforms would create “momentum†for XRP.</span>
<span style="color: #00cd00;">+156.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+In a May 27, 2016 email, Garlinghouse asked Ripple employees for an “update on</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+the status of . . . listing XRP†on global digital asset trading platforms.</span>
<span style="color: #00cd00;">+157.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+In August 2016, Garlinghouse sought to persuade the president of a digital asset</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+trading platform whose principal place of business is in California (“Platform Aâ€) to permit buying</span>
<span style="color: #00cd00;">+and selling of XRP on Platform A. In an August 19, 2016 email, Garlinghouse stated he had “joined</span>
<span style="color: #00cd00;">+Chris Larsen about a year ago in leading the Ripple team†and that Ripple was “looking for credible</span>
<span style="color: #00cd00;">+exchanges to list XRP where we can send market makers and trading desks.â€</span>
<span style="color: #00cd00;">+158.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+To support Ripple’s efforts to “list†XRP on digital asset platforms, Garlinghouse</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+simultaneously negotiated deals as to XRP with other entities in the digital asset space. For example,</span>
<span style="color: #00cd00;">+in an October 11, 2016 email to the CEO of a California-based custodial services provider,</span>
<span style="color: #00cd00;">+Garlinghouse spoke of Ripple’s “key milestone of listing XRP on two digital asset exchanges by the</span>
<span style="color: #00cd00;">+end of Q4,†asked the provider to “implement[ ] custody [or wallet] services for XRP†by October</span>
<span style="color: #00cd00;">+17, 2016, and promised to “provide whatever resources [were] needed†for that purpose.</span>
<span style="color: #00cd00;">+159.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+In December 2016, Garlinghouse again sought to get XRP listed on Platform A. In</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+a December 1, 2016 email, he stated that Ripple’s 2017 “incentive program†for exchanges, along</span>
<span style="color: #00cd00;">+with Ripple’s efforts to increase institutional adoption of XRP for settlement, would “enhance the</span>
<span style="color: #00cd00;">+opportunity for [Platform A’s] traders†and that Ripple was “happy to offer minimum monthly</span>
<span style="color: #00cd00;">+guarantees in 2017 to get this onto your near term priorities list.â€</span>
<span style="color: #00cd00;">+160.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse and Larsen continued to participate in Ripple’s effort to make XRP</span>
<span style="color: #cd0000;">-In 2017 and 2018, Ripple also entered into agreements with at least ten digital asset</span>
<span style="color: #00cd00;">+available to buy and sell on Platform A in 2017 and 2018. In an internal Ripple email of July 2018,</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+28</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 29 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Ripple Agent-2 updated Garlinghouse on “two paths in parallel†Ripple was taking to achieve listing</span>
<span style="color: #00cd00;">+on Platform A, with Garlinghouse directing Ripple Agent-2 to make any document outlining these</span>
<span style="color: #00cd00;">+paths “shareable†and “readable.†Larsen then weighed in, directing Garlinghouse to “work on a</span>
<span style="color: #00cd00;">+fact based detailed doc that shows†what he viewed as important differences between the XRP</span>
<span style="color: #00cd00;">+Ledger and the ledger for other digital assets.</span>
<span style="color: #00cd00;">+161.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+In 2017 and 2018, Ripple entered into agreements with at least ten digital asset</span>
trading platforms—none of which were registered with the SEC in any capacity, and at least two of
<span style="color: #cd0000;">-which have principal places of business in the United States—providing for listing and trading</span>
<span style="color: #00cd00;">+which have principal places of business in the United States—providing for “listing†and trading</span>
incentives with respect to XRP. Ripple paid these platforms a fee, typically in XRP, to permit the
buying and selling of XRP on their systems and sometimes incentives for achieving volume metrics.
<span style="color: #cd0000;">-146.</span>
<span style="color: #00cd00;">+162.</span>
As just one example of these arrangements, in May 2017, Ripple gave a digital asset
<span style="color: #cd0000;">-trading platform, based in the United States, 17 million XRP in exchange for the platform’s</span>
<span style="color: #cd0000;">-agreement to make XRP available to buy and sell on its platform, as well as rebates on trading fees</span>
<span style="color: #cd0000;">-of up to $60,000 per month for three months, and up to $150,000 in incentive payments per month</span>
<span style="color: #cd0000;">-for three months to the top three traders of XRP for other assets on the platform.</span>
<span style="color: #cd0000;">-147.</span>
<span style="color: #00cd00;">+trading platform based in the United States (“Platform Bâ€) 17 million XRP in exchange for the</span>
<span style="color: #00cd00;">+platform’s agreement to make XRP available to buy and sell on its platform, as well as rebates on</span>
<span style="color: #00cd00;">+trading fees of up to $60,000 per month for three months. Ripple also promised Platform B up to</span>
<span style="color: #00cd00;">+$150,000 in incentive payments per month for three months to the top three traders of XRP for</span>
<span style="color: #00cd00;">+other assets on Platform B.</span>
<span style="color: #00cd00;">+163.</span>
Between October 2016 and October 2017, Ripple distributed approximately 28
million XRP to these platforms, with a then-current market value of $6.8 million.
<span style="color: #00cd00;">+164.</span>
<span style="color: #cd0000;">-3</span>
<span style="color: #00cd00;">+Ripple viewed these efforts as critical to its ability to sell XRP at favorable prices to</span>
<span style="color: #cd0000;">-To pressure Option Investor B to sell back the option grant (which covered approximately</span>
<span style="color: #cd0000;">-5% of the XRP in existence at a reduced price), Ripple Agent-3 suggested to Ripple Agent-2 in an</span>
<span style="color: #cd0000;">-email on February 26, 2017 that Ripple make the option public. Ripple Agent-2 responded that it</span>
<span style="color: #cd0000;">-“would cause us some headaches . . . Better to keep it private.â€</span>
<span style="color: #cd0000;">-25</span>
<span style="color: #00cd00;">+fund its operations. For example, as Ripple Agent-3 instructed a Ripple employee and an XRP</span>
<span style="color: #00cd00;">+investor in June 2017, Ripple had to “load[ ] with ultimatums†any conversation with one particular</span>
<span style="color: #00cd00;">+Manhattan-based digital asset trading platform (“Platform Câ€), because it was a “HIGH VALUE</span>
<span style="color: #00cd00;">+target†for Ripple.</span>
<span style="color: #00cd00;">+165.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 26 of 71</span>
<span style="color: #00cd00;">+Ripple tried repeatedly and unsuccessfully to persuade Platform C to “list XRP on</span>
<span style="color: #cd0000;">-148.</span>
<span style="color: #00cd00;">+29</span>
<span style="color: #cd0000;">-As reflected in internal documents, Ripple made these efforts because it believed that</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 30 of 79</span>
<span style="color: #cd0000;">-increased trading volume for XRP on digital asset trading platforms would create “momentum†for</span>
<span style="color: #cd0000;">-XRP. For example, as Ripple Agent-3 instructed a Ripple employee and an XRP investor in June</span>
<span style="color: #cd0000;">-2017, Ripple had to “load[ ] with ultimatums†any conversation with one particular Manhattan-based</span>
<span style="color: #cd0000;">-digital asset trading platform, because it was a “HIGH VALUE target†for Ripple.</span>
<span style="color: #cd0000;">-149.</span>
<span style="color: #00cd00;">+[its] exchange†by offering to “cover implementation costs, paying rebates, [and] brokering intros to</span>
<span style="color: #00cd00;">+large XRP holders for custody.†Undaunted by these initial failures, Ripple Agent-3 emailed the two</span>
<span style="color: #00cd00;">+owners of the firm directly in July 2017, copying Garlinghouse, and asked: “Does a $1M cash</span>
<span style="color: #00cd00;">+payment move the needle for a Q3 listing?â€</span>
<span style="color: #00cd00;">+166.</span>
<span style="color: #cd0000;">-Ripple tried repeatedly and unsuccessfully to persuade that digital asset trading firm</span>
<span style="color: #00cd00;">+Garlinghouse, like Ripple, also viewed these types of efforts as critical components</span>
<span style="color: #cd0000;">-to “list XRP on [its] exchange†by offering to “cover implementation costs, paying rebates, [and]</span>
<span style="color: #cd0000;">-brokering intros to large XRP holders for custody.†Undaunted by these initial failures, Ripple</span>
<span style="color: #cd0000;">-Agent-3 emailed the two owners of the firm directly in July 2017, copying Garlinghouse, and asked:</span>
<span style="color: #cd0000;">-“Does a $1M cash payment move the needle for a Q3 listing?â€</span>
<span style="color: #cd0000;">-150.</span>
<span style="color: #00cd00;">+of Ripple’s efforts as to XRP. In an internal March 29, 2018 email, he described Ripple’s efforts as</span>
<span style="color: #00cd00;">+to Platform C as an example of Ripple “do[ing] whatever we can to invest in the success of the XRP</span>
<span style="color: #00cd00;">+ecosystem,†which he viewed as “totally consistent with what [he had] also proactively said†to the</span>
<span style="color: #00cd00;">+public about Ripple’s intended efforts.</span>
<span style="color: #00cd00;">+167.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse also understood that, while making XRP available on digital asset</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+trading platforms could help XRP’s price, a platform’s refusal to “list XRPâ€â€”particularly out of</span>
<span style="color: #00cd00;">+concerns that XRP was a security—could, in the words of an April 10, 2018 Garlinghouse email to</span>
<span style="color: #00cd00;">+Platform A, “hurt[] Ripple.†Accordingly, when news suggested that Platform A had refused to</span>
<span style="color: #00cd00;">+make XRP available to the public, Garlinghouse, working with Ripple’s internal and external public</span>
<span style="color: #00cd00;">+relations teams, prepared “talking points†intended to dispel the notion that XRP was a security or</span>
<span style="color: #00cd00;">+that Platform A had refused to make XRP available to the public out of concerns that XRP was a</span>
<span style="color: #00cd00;">+security.</span>
<span style="color: #00cd00;">+168.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Larsen was involved in efforts to promote XRP on various platforms, even after he</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+was no longer CEO. On August 30, 2018, he emailed Ripple Agent-1 asking if a certain futures and</span>
<span style="color: #00cd00;">+options exchange “still plan[ned] to release [an XRP denominated] index today?†Ripple believed</span>
<span style="color: #00cd00;">+this would further their goal of getting an XRP derivative product listed on that exchange. Ripple</span>
<span style="color: #00cd00;">+Agent-1 responded that the platform was not, due to concerns raised by its lawyers. Larsen</span>
<span style="color: #00cd00;">+forwarded this response, noting: “What a pain these guys are.†Garlinghouse, in turn, replied by</span>
<span style="color: #00cd00;">+asking Ripple Agent-1 to keep both him and Larsen “updated on this topic.â€</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+30</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 31 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+169.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+At all relevant times, Garlinghouse and Larsen knew or recklessly disregarded that</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+XRP purchasers had a reasonable expectation of deriving profits by buying and selling XRP on these</span>
<span style="color: #00cd00;">+digital asset trading platforms.</span>
<span style="color: #00cd00;">+170.</span>
Table 3, below, summarizes the Other XRP Distributions.
Type of Other
<span style="color: #00cdcd;">@@ -1335,9 +1540,6 @@</span>
Digital Asset Trading Oct. 2016 to
Platforms Oct. 2017
Total
<span style="color: #cd0000;">-Table 3: Other XRP Distributions</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-26</span>
597,000,000
324,000,000
<span style="color: #00cdcd;">@@ -1347,8 +1549,7 @@</span>
28,400,000
4,055,400,000
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 27 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #00cd00;">+Table 3: Other XRP Distributions</span>
F.
Larsen’s and Garlinghouse’s Sales of XRP
<span style="color: #00cdcd;">@@ -1357,25 +1558,30 @@</span>
Larsen’s Sales
<span style="color: #cd0000;">-151.</span>
<span style="color: #00cd00;">+171.</span>
At all relevant times, Larsen was either the CEO or chairman of the Board of
Directors of Ripple and thus part of the control group of XRP’s issuer.
<span style="color: #cd0000;">-152.</span>
<span style="color: #00cd00;">+172.</span>
While CEO, Larsen had the power to appoint six out of eight seats on Ripple’s
Board of Directors, and, as Ripple’s largest equity shareholder, had 68% of its voting power.
<span style="color: #cd0000;">-153.</span>
<span style="color: #00cd00;">+173.</span>
The following sales of XRP took place with Larsen working in coordination with
Ripple to develop and maintain a liquid market for XRP through which Defendants could monetize
<span style="color: #cd0000;">-their holdings. Email between Larsen and the Market Maker, from at least 2017 through at least</span>
<span style="color: #00cd00;">+their holdings. Emails between Larsen and the Market Maker, from at least 2017 through at least</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+31</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 32 of 79</span>
<span style="color: #00cd00;">+</span>
2019, show that, like Ripple and Garlinghouse, Larsen also attempted to strike a delicate balance
between maximizing profits from his XRP sales while not depressing the price of XRP.
<span style="color: #cd0000;">-154.</span>
<span style="color: #00cd00;">+174.</span>
Larsen at times paid the Market Maker to make offers and sales of his XRP on digital
<span style="color: #00cdcd;">@@ -1383,15 +1589,31 @@</span>
to investors all over the world, including in the United States, without marketing or restricting offers
or sales to persons who had a “use†for XRP and without restricting purchasers from reselling their
XRP to other investors, including to investors in the United States or elsewhere.
<span style="color: #cd0000;">-155.</span>
<span style="color: #00cd00;">+175.</span>
Larsen and his wife netted approximately $450 million from these sales.
<span style="color: #cd0000;">-156.</span>
<span style="color: #00cd00;">+176.</span>
<span style="color: #cd0000;">-Larsen directed his offers and sales of XRP from within the United States.</span>
<span style="color: #00cd00;">+Continuing into at least 2020, Larsen directed his offers and sales of XRP from</span>
<span style="color: #cd0000;">-157.</span>
<span style="color: #00cd00;">+within the United States.</span>
<span style="color: #00cd00;">+177.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Larsen’s offers and sales of XRP occurred on various digital asset trading platforms,</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+including Platforms A and B and at least two others incorporated in the United States, and on one</span>
<span style="color: #00cd00;">+incorporated abroad but with a principal place of business in New York. Though Larsen also made</span>
<span style="color: #00cd00;">+offers and sales of XRP through certain digital asset trading platforms whose parent corporations</span>
<span style="color: #00cd00;">+are located outside the United States, Larsen opened his account with at least one of those</span>
<span style="color: #00cd00;">+platforms’ United States-based wholly owned subsidiary. Moreover, at least one of the digital asset</span>
<span style="color: #00cd00;">+trading platforms with a foreign parent through which Larsen offered and sold his XRP used</span>
<span style="color: #00cd00;">+resources located in the United States to execute Larsen’s trades in XRP.</span>
<span style="color: #00cd00;">+178.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Larsen made offers and sales of XRP to persons in the United States.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+179.</span>
Larsen intends to continue selling his XRP, as shown in an email he sent an investor
<span style="color: #00cdcd;">@@ -1399,108 +1621,130 @@</span>
XRP, to which Larsen described the “widely held view that over time, its [sic] better to have widely
held assets, so continued reduction of Ripple and founder holdings is likely constructive.†On
September 22, 2020, Larsen also publicly confirmed from his Twitter account that he had
<span style="color: #cd0000;">-transferred half a billion of his XRP, then worth approximately $115 million, to accounts he</span>
<span style="color: #cd0000;">-27</span>
<span style="color: #00cd00;">+32</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 28 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 33 of 79</span>
<span style="color: #00cd00;">+transferred half a billion of his XRP, then worth approximately $115 million, to accounts he</span>
established with a digital asset firm incorporated in New York, and recently did in fact make such
transfers, further evidencing his present intention to continue his unregistered sales of XRP.
2.
Garlinghouse’s Sales
<span style="color: #cd0000;">-158.</span>
<span style="color: #00cd00;">+180.</span>
From April 2015 to the present, Garlinghouse was either the COO or the CEO of
Ripple and thus part of the control group of XRP’s issuer.
<span style="color: #cd0000;">-159.</span>
<span style="color: #00cd00;">+181.</span>
After Garlinghouse joined Ripple in 2015, Garlinghouse was awarded XRP from
Ripple, aligning his financial incentives with Ripple’s. Garlinghouse later resold significant quantities
of XRP to amass profits well over one hundred million dollars.
<span style="color: #cd0000;">-160.</span>
<span style="color: #00cd00;">+182.</span>
The following sales took place with Garlinghouse working in coordination with
Ripple to develop and maintain a liquid XRP market that the Defendants could monetize.
<span style="color: #cd0000;">-161.</span>
<span style="color: #00cd00;">+183.</span>
<span style="color: #cd0000;">-From April 2017 through December 2019, Garlinghouse sold over 321 million of his</span>
<span style="color: #00cd00;">+From April 2017 through at least October 2020, Garlinghouse sold over 357 million</span>
<span style="color: #cd0000;">-XRP, for approximately $150 million, to the public through digital asset trading platforms or other</span>
<span style="color: #cd0000;">-intermediaries. Beginning in December 2017, Garlinghouse used the Market Maker, who deployed</span>
<span style="color: #cd0000;">-trading bots on multiple, worldwide digital asset trading platforms, to sell his XRP to the public.</span>
<span style="color: #cd0000;">-162.</span>
<span style="color: #00cd00;">+of his XRP, for approximately $159 million, to the public through digital asset trading platforms or</span>
<span style="color: #00cd00;">+other intermediaries. Beginning in December 2017, Garlinghouse used the Market Maker to sell his</span>
<span style="color: #00cd00;">+XRP to the public. The Market Maker deployed trading bots on multiple, worldwide digital asset</span>
<span style="color: #00cd00;">+trading platforms and, in the second half of 2020 alone, sold at least another $9 million of</span>
<span style="color: #00cd00;">+Garlinghouse’s XRP on Garlinghouse’s behalf.</span>
<span style="color: #00cd00;">+184.</span>
Garlinghouse offered and sold XRP to investors all over the world, including in the
United States, without marketing or restricting offers or sales to persons who had a “use†for XRP
and without restricting purchasers from reselling their XRP to other investors, including to investors
in the United States or elsewhere.
<span style="color: #cd0000;">-163.</span>
<span style="color: #00cd00;">+185.</span>
<span style="color: #cd0000;">-Garlinghouse directed his offers and sales of XRP from within the United States.</span>
<span style="color: #00cd00;">+Continuing into at least 2020, Garlinghouse directed his offers and sales of XRP</span>
<span style="color: #cd0000;">-164.</span>
<span style="color: #00cd00;">+from within the United States.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+33</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 34 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+186.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse’s offers and sales occurred on various digital asset trading platforms,</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+including Platforms A and B and at least two others incorporated in the United States, and one</span>
<span style="color: #00cd00;">+incorporated abroad but with a principal place of business in New York. Though Garlinghouse also</span>
<span style="color: #00cd00;">+made offers and sales of XRP through certain digital asset trading platforms whose parent</span>
<span style="color: #00cd00;">+corporations are located outside the United States, Garlinghouse opened his account with at least</span>
<span style="color: #00cd00;">+one of those platforms’ United States-based wholly owned subsidiary. Moreover, at least one of the</span>
<span style="color: #00cd00;">+digital asset trading platforms with a foreign parent through which Garlinghouse offered and sold</span>
<span style="color: #00cd00;">+his XRP used resources located in the United States to execute Garlinghouse’s trades in XRP.</span>
<span style="color: #00cd00;">+187.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse made offers and sales of XRP to persons in the United States.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+188.</span>
At various times between April 2017 and at least December 2019, Garlinghouse also
paused his XRP sales at the Market Maker’s recommendation because XRP’s market price was
<span style="color: #cd0000;">-falling, seeking to avoid having the latter’s own XRP sales further drive down XRP’s market price.</span>
<span style="color: #cd0000;">-165.</span>
<span style="color: #00cd00;">+falling, seeking to avoid having the former’s own XRP sales further drive down XRP’s market price.</span>
<span style="color: #00cd00;">+189.</span>
Recently, Garlinghouse transferred some of his XRP into accounts he opened with
digital asset trading platforms, evidencing his intention to continue his unregistered sales of XRP.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-28</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 29 of 71</span>
<span style="color: #cd0000;">-</span>
III.
Defendants Created and Control the XRP Trading Markets While Selectively
Disclosing Information about Their Activities
<span style="color: #cd0000;">-166.</span>
<span style="color: #00cd00;">+190.</span>
Defendants’ offers and sales of XRP in the Offering occurred into a market that they
had largely created and which—consistent with their dual purposes of raising funds from their XRP
sales and managing the liquidity of the XRP market—they played a significant role overseeing.
<span style="color: #cd0000;">-167.</span>
<span style="color: #00cd00;">+191.</span>
Defendants’ efforts in this regard principally involved monitoring the timing and
amount of their XRP sales and purchases, sometimes to coincide with strategic announcements
about Ripple or XRP, and establishing an escrow for Ripple’s own XRP holdings.
<span style="color: #cd0000;">-168.</span>
<span style="color: #00cd00;">+192.</span>
The ability to sell investments in liquid markets is an important consideration for
investors when determining whether to buy securities because it represents one way in which they
can realize profits from their investments.
<span style="color: #00cd00;">+34</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 35 of 79</span>
<span style="color: #00cd00;">+</span>
A.
Ripple Managed the Price and Liquidity in the XRP Market
<span style="color: #cd0000;">-169.</span>
<span style="color: #00cd00;">+193.</span>
Throughout the Offering, Ripple—as Garlinghouse and Larsen directed at various
times—undertook significant efforts to monitor, manage, and impact the XRP trading markets,
including the trading price and volume of XRP.
<span style="color: #cd0000;">-170.</span>
<span style="color: #00cd00;">+194.</span>
As described in Section II, these efforts included: (1) using algorithms to time the
amount and price of Defendants’ XRP sales into the market; (2) paying incentives to certain market
makers—some of which Ripple engaged to effect the Market Sales—if the sales reached certain
trading volume levels on XRP; and (3) paying digital asset trading platforms to permit XRP trading.
<span style="color: #cd0000;">-171.</span>
<span style="color: #00cd00;">+195.</span>
These efforts also included timing the prices and amounts of XRP sales to achieve
<span style="color: #00cdcd;">@@ -1508,127 +1752,134 @@</span>
Ripple sought to maximize the amount it could earn from the XRP Market Sales while minimizing
volatility and any downward pressure on XRP’s market price caused by Ripple’s constant injections
of new XRP into the market to raise operating funds.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-29</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 30 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-172.</span>
<span style="color: #00cd00;">+196.</span>
Ripple internally described these strategies as aimed at maximizing the amount of
money Ripple could raise in the Offering or at achieving “more speculative [XRP] volume.†At
times, Ripple publicly described its efforts as meant to protect the public’s investments in XRP.
<span style="color: #cd0000;">-173.</span>
<span style="color: #00cd00;">+197.</span>
Starting in late 2015, Ripple directed the Market Maker to buy or sell XRP (on
occasion strategically timed around Ripple announcements), to account for the volume impact of
XRP trading, as a Ripple executive told the Market Maker by email on September 20, 2016.
<span style="color: #cd0000;">-174.</span>
<span style="color: #00cd00;">+198.</span>
To accomplish this, Ripple had an internal “XRP Markets Team†that monitored
XRP’s price and volume daily and regularly communicated with Ripple’s XRP market makers about
Ripple’s XRP sales strategy, which relied on selling XRP in amounts no greater than a certain
percentage of XRP’s daily volume, generally between 10 and 25 basis points.
<span style="color: #cd0000;">-175.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+35</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 36 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+199.</span>
Starting in 2017 at the latest, Larsen and Garlinghouse participated in meetings with,
or were apprised of discussions by, the XRP Markets Team, in which they discussed adjustments to
Ripple’s sales strategy and recommendations regarding the amount of Ripple’s XRP to sell, decisions
over which Larsen and Garlinghouse had final authority as Ripple’s CEOs.
<span style="color: #cd0000;">-176.</span>
<span style="color: #00cd00;">+200.</span>
On April 11, 2016, Ripple also directed the Market Maker to buy XRP in the open
market with the goal of “[t]arget[ing] $0.008 incrementally over the course of 2 days†while
“[c]ap[ping] activity at 5% of daily trading volume[,]†among other things.
<span style="color: #cd0000;">-177.</span>
<span style="color: #00cd00;">+201.</span>
A few months later, on August 16, 2016, a Ripple employee reported to others at
Ripple the “robust discussion activity [he had seen] on the XRPchat thread†(which included
“[p]ositive feedback†with respect to “[u]nderstanding that Ripple has a long-term strategy, in which
XRP is one of a few big betsâ€) and the “notable market activity†for XRP in recent days. (“XRP
<span style="color: #cd0000;">-Chat is an online forum that describes itself as “[t]he Largest XRP and Ripple Community Forumâ€.)</span>
<span style="color: #cd0000;">-178.</span>
<span style="color: #00cd00;">+Chat is an online forum that describes itself as “[t]he Largest XRP and Ripple Community Forum.â€)</span>
<span style="color: #00cd00;">+202.</span>
A Ripple vice president of finance (the “VP of Financeâ€) then asked Garlinghouse
and Ripple Agent-3 “if [they] discussed whether we should turn off the buying now with this news
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-30</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 31 of 71</span>
<span style="color: #cd0000;">-</span>
and the higher volume?†Ripple Agent-3 responded: “The thesis . . . is to show a period of
consistent buying from an account that is known to be a consistent seller. The intended impact of
the buying is not to move the price but rather to provide confidence in the market, which in turn
will move the price.â€
<span style="color: #cd0000;">-179.</span>
<span style="color: #00cd00;">+203.</span>
Following this exchange, Ripple did not “turn off the buying†of XRP.
<span style="color: #cd0000;">-180.</span>
<span style="color: #00cd00;">+204.</span>
The following month, September 2016, Ripple directed the Market Maker to place
XRP buy and sell orders around the time of announcements Ripple made that month referring to
Ripple’s achievements, though neither announcement concerned XRP.
<span style="color: #cd0000;">-181.</span>
<span style="color: #00cd00;">+205.</span>
On September 20, 2016, the VP of Finance emailed the Market Maker and said that,
after consultation with Garlinghouse and Larsen, Ripple wanted to “better understand[ ] the impact
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+36</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 37 of 79</span>
<span style="color: #00cd00;">+</span>
of our purchases [of XRP] over the past week†and that Ripple’s “[c]urrent thinking [was] that we
should use our full $300k [designated for XRP purchases] in the first 24 hours post announcement.â€
<span style="color: #cd0000;">-182.</span>
<span style="color: #00cd00;">+206.</span>
The next day, the Market Maker provided the VP of Finance and Ripple Agent-3
with data showing “the positive relationship between hourly price changes of XRP and the hourly
Net XRP purchases,†while noting the lack of data to provide a “statistically significant result.â€
<span style="color: #cd0000;">-183.</span>
<span style="color: #00cd00;">+207.</span>
On Friday, September 23, 2016, the VP of Finance, after consulting with
Garlinghouse and Larsen and obtaining Garlinghouse’s “go ahead,†directed the Market Maker to
“keep the buying light [the day after the announcement] and then do the bigger slug starting
Sunday.†The Market Maker agreed.
<span style="color: #cd0000;">-184.</span>
<span style="color: #00cd00;">+208.</span>
On Monday, September 26, 2016, the Market Maker reported to Ripple that it had
“spent approximately $200K of the second tranche†and recommended a strategy “to make
aggressive markets†going forward, to which the VP of Finance agreed.
<span style="color: #cd0000;">-185.</span>
<span style="color: #00cd00;">+209.</span>
On October 15, 2016, the VP of Finance informed the Market Maker that, after an
upcoming announcement, Ripple “would like to go to sales at 1%†of trading volume and asked the
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-31</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 32 of 71</span>
<span style="color: #cd0000;">-</span>
Market Maker to “be thoughtful / opportunistic around the timing of implementing 1%†because
Ripple did not “want to depress the rally but rather capitalize on the additional volume.†He further
instructed the Marker Maker “to take more money off the table,†if there was a chance to do so.
<span style="color: #cd0000;">-186.</span>
<span style="color: #00cd00;">+210.</span>
Internally, Ripple executives frequently expressed concern over XRP’s price and
planned proactive steps to protect the market.
<span style="color: #cd0000;">-187.</span>
<span style="color: #00cd00;">+211.</span>
<span style="color: #cd0000;">-For example, in an August 12, 2017 e-mail to Ripple Agent-2 and Ripple Agent-3,</span>
<span style="color: #00cd00;">+For example, in 2016 while he was COO, Garlinghouse ensured that Ripple placed</span>
<span style="color: #cd0000;">-Garlinghouse raised concerns about XRP being “squarely left out†of a recent market “rally†and</span>
<span style="color: #cd0000;">-asked whether Ripple’s recent XRP sales were “impacting the market?†He instructed certain Ripple</span>
<span style="color: #cd0000;">-employees to “proactively†attempt to increase speculative trading value with positive XRP news.</span>
<span style="color: #cd0000;">-188.</span>
<span style="color: #00cd00;">+restrictions on sales of XRP by Ripple’s Co-Founder in order to quell concerns that these sales</span>
<span style="color: #00cd00;">+would negatively impact XRP’s market trading.</span>
<span style="color: #00cd00;">+212.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+As another example, in an August 12, 2017 e-mail to Ripple Agent-2 and Ripple</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Agent-3, Garlinghouse raised concerns about XRP being “squarely left out†of a recent market</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+37</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 38 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+“rally†and asked whether Ripple’s recent XRP sales were “impacting the market?†He instructed</span>
<span style="color: #00cd00;">+certain Ripple employees to “proactively†attempt to increase speculative trading value with positive</span>
<span style="color: #00cd00;">+XRP news.</span>
<span style="color: #00cd00;">+213.</span>
Similarly, in September 2019, Ripple’s “Head of Global Institutional Marketsâ€
<span style="color: #00cdcd;">@@ -1637,45 +1888,44 @@</span>
recommended “buy[ing] [XRP] back†because she was very “worried about xrp at 0.20†and was
“DREAD[ING]†an upcoming report—referring to quarterly reports Ripple began publishing in
January 2017 (the “Markets Reportsâ€)—if Ripple didn’t “take swift, creative action now (!)â€
<span style="color: #cd0000;">-189.</span>
<span style="color: #00cd00;">+214.</span>
Defendants did not disclose publicly this XRP buying and selling strategy.
<span style="color: #cd0000;">-190.</span>
<span style="color: #00cd00;">+215.</span>
But Ripple did publicly tout other actions it was taking to support XRP’s market
price, including to limit XRP supply or to create scarcity through XRP buybacks.
<span style="color: #cd0000;">-191.</span>
<span style="color: #00cd00;">+216.</span>
For example, on January 4, 2017, in an effort to assuage XRP investor concerns,
Ripple told Institutional Investor C that Ripple “only sells or transfers XRP to financial institutions
and accredited investors who bring payment volume and/or FX liquidity to Ripple.†Ripple made
similar statements publicly, such as on its website, the “XRP Chat,†and certain Markets Reports.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-32</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 33 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-192.</span>
<span style="color: #00cd00;">+217.</span>
Similarly, in its Markets Report for the fourth quarter of 2017, Ripple told investors
that it placed sales volume “restrictions†on the XRP it sold directly to financial institutions to
“mitigate the risk of market instability due to potential subsequent large sales.â€
<span style="color: #cd0000;">-193.</span>
<span style="color: #00cd00;">+218.</span>
Later, in approximately June 2020, Ripple employees prepared and delivered an
internal presentation for Garlinghouse and Larsen in which the employees highlighted that “XRP
began underperforming [Bitcoin]†since early May 2020, partly because of Ripple’s sales of XRP.
The employees proposed “supply limiting tactics,†such as Ripple’s buying back XRP.
<span style="color: #cd0000;">-194.</span>
<span style="color: #00cd00;">+219.</span>
Garlinghouse approved the “buy back†option.
<span style="color: #cd0000;">-195.</span>
<span style="color: #00cd00;">+38</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 39 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+220.</span>
Following Garlinghouse’s decision, Ripple disclosed on November 5, 2020, in its
<span style="color: #00cdcd;">@@ -1685,58 +1935,58 @@</span>
Defendants Established an XRP Escrow
<span style="color: #cd0000;">-196.</span>
<span style="color: #00cd00;">+221.</span>
XRP investors became concerned that Ripple’s sales could cause XRP’s price to
crash. As Garlinghouse explained in an internal email on May 16, 2017, XRP investors were
concerned that Ripple could “sell its [then] 61.68[ ]B[illion] XRP in the market at any time.â€
<span style="color: #cd0000;">-197.</span>
<span style="color: #00cd00;">+222.</span>
If Ripple had filed a registration statement and quarterly and annual reports—as it
would have been required to do—Ripple’s sales would have been publicly disclosed. They were not.
<span style="color: #cd0000;">-198.</span>
<span style="color: #00cd00;">+223.</span>
To assuage investor concerns, on May 16, 2017, Ripple announced that it would
place 55 billion XRP (most of its current holdings) into a cryptographically-secured escrow that
would restrict Ripple to accessing only one billion XRP every month (the “XRP Escrowâ€).
<span style="color: #cd0000;">-199.</span>
<span style="color: #00cd00;">+224.</span>
Both Larsen and Garlinghouse were instrumental to the formation of the XRP
Escrow by developing and, ultimately, approving the idea.
<span style="color: #cd0000;">-200.</span>
<span style="color: #00cd00;">+225.</span>
An internal Ripple memo prepared by Ripple Agent-3 around April or May 2017 (the
“Proposal to Escrow Ripple’s XRPâ€) explained that one purpose of the escrow was to “secur[e]
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-33</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 34 of 71</span>
<span style="color: #cd0000;">-</span>
speculative liquidity†in XRP and to “drive a material increase in XRP trading volume/liquidity†by
removing uncertainty about when Ripple might dispose of its XRP holdings.
<span style="color: #cd0000;">-201.</span>
<span style="color: #00cd00;">+226.</span>
The Proposal to Escrow Ripple’s XRP noted that Ripple wanted “more XRP
liquidity and [that its] efforts are helping, [but] things are not moving as fast as [Ripple] want[s].â€
<span style="color: #cd0000;">-202.</span>
<span style="color: #00cd00;">+227.</span>
The Proposal to Escrow Ripple’s XRP concluded that the XRP Escrow would be
successful if it resulted in “immediate increase in volume and price appreciation†for XRP as one of
the “[r]ewards†to counter-balance the increased “[r]isk†of “Cash flow shortfall†for Ripple.
<span style="color: #cd0000;">-203.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+39</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 40 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+228.</span>
Ripple and Garlinghouse publicly touted the formation of the XRP Escrow as proof
that Ripple and XRP holders shared a common interest in the success of Ripple’s efforts as to XRP
and as one of Ripple’s many efforts to manage the trading market for XRP.
<span style="color: #cd0000;">-204.</span>
<span style="color: #00cd00;">+229.</span>
In other words, by announcing the XRP Escrow, Defendants sought to encourage
<span style="color: #00cdcd;">@@ -1747,29 +1997,24 @@</span>
IV.
XRP Was a Security Throughout the Offering
<span style="color: #cd0000;">-205.</span>
<span style="color: #00cd00;">+230.</span>
As noted, the Supreme Court made clear in its Howey decision of 1946 that the
definition of whether an instrument is an investment contract and therefore a security is a “flexible
rather than a static principle, one that is capable of adaptation to meet the countless and variable
schemes devised by those who seek the use of the money of others on the promise of profits.â€
<span style="color: #cd0000;">-206.</span>
<span style="color: #00cd00;">+231.</span>
At all relevant times during the Offering, XRP was an investment contract and
therefore a security subject to the registration requirements of the federal securities laws.
<span style="color: #cd0000;">-207.</span>
<span style="color: #00cd00;">+232.</span>
Defendants understood and acknowledged in non-public communications that the
principal reason for anyone to buy XRP was to speculate on it as an investment.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-34</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 35 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-208.</span>
<span style="color: #00cd00;">+233.</span>
For example, Ripple Agent-3 stated in an internal document called the “XRP
<span style="color: #00cdcd;">@@ -1778,57 +2023,62 @@</span>
you are holding xrp you should want [Ripple Labs] to retain xrp for business development.†Ripple
acknowledged not only that XRP holders were speculating on Ripple’s ability to deploy XRP to
develop its business, but also that Ripple’s interests aligned with other XRP holders’ interests.
<span style="color: #cd0000;">-209.</span>
<span style="color: #cd0000;">-Similarly, on December 7, 2015, Ripple requested that the issuer of a fund created to</span>
<span style="color: #00cd00;">+40</span>
<span style="color: #cd0000;">-generate investor exposure to XRP (through XRP Ripple sold to the fund), disclose the risk that</span>
<span style="color: #cd0000;">-XRP could be deemed a security under the federal securities laws. Specifically, Ripple requested that</span>
<span style="color: #cd0000;">-the following language be added to the risk disclosures for the fund:</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 41 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+234.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Similarly, on December 7, 2015, Ripple requested that the issuer of XRP Fund A</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+(which would generate investor exposure to XRP through XRP Ripple sold to the fund), disclose</span>
<span style="color: #00cd00;">+the risk that XRP could be deemed a security under the federal securities laws. Specifically, Ripple</span>
<span style="color: #00cd00;">+requested that the following language be added to the risk disclosures for XRP Fund A:</span>
The Ripple ecosystem’s reliance on the efforts of Ripple Labs – the single largest
holder of XRP – to promote and expand the ecosystem, creates greater risk that
XRP might be deemed a security as compared to other virtual currencies and
Ripple Labs might be deemed to be operating as an unregistered securities
exchange, broker, or dealer under federal and State securities laws.
<span style="color: #cd0000;">-210.</span>
<span style="color: #00cd00;">+235.</span>
Similarly, in its official application to the NYDFS for XRP II in 2016, Ripple
acknowledged that buyers were “purchasing XRP for speculative purposes.â€
<span style="color: #cd0000;">-211.</span>
<span style="color: #00cd00;">+236.</span>
Later, in July 2019, a Ripple senior vice president emailed the CEO of the United
States branch of a digital asset trading firm with which Ripple sought to make XRP available for
trading. In his email, the Ripple executive explained: “The primary use case for XRP today is
speculative and the exchanges . . . are the main enabler of this use case.â€
<span style="color: #cd0000;">-212.</span>
<span style="color: #00cd00;">+237.</span>
Sophisticated investors agreed. For example, a hedge fund, to which Ripple sold
XRP, explained to the fund’s investors this economic reality in offering materials from March 2015:
“The increase in XRP value is heavily dependent on the success of Ripple.â€
<span style="color: #cd0000;">-213.</span>
<span style="color: #00cd00;">+238.</span>
Consistent with its privately-stated understanding, Ripple publicly offered and sold
XRP as an investment into a common enterprise that included Ripple’s promises to undertake
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-35</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 36 of 71</span>
<span style="color: #cd0000;">-</span>
significant entrepreneurial and managerial efforts, including to create a liquid market for XRP, which
would in turn increase demand for XRP and therefore its price.
<span style="color: #cd0000;">-214.</span>
<span style="color: #00cd00;">+239.</span>
Starting in at least 2013 and through the Offering, Defendants made statements
promoting XRP as described in the preceding paragraph in a variety of publicly available media,
including Twitter, YouTube, major financial news networks, industry conferences, the XRP Chat, an
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+41</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 42 of 79</span>
<span style="color: #00cd00;">+</span>
online discussion forum and an informational posting about Ripple that it hosted on its website (but
since deleted) called “Ripple Forum†and “Ripple Wiki,†respectively, and the Markets Reports.
<span style="color: #cd0000;">-215.</span>
<span style="color: #00cd00;">+240.</span>
In fact, throughout the Offering, Ripple held itself out as the primary source of
<span style="color: #00cdcd;">@@ -1838,60 +2088,65 @@</span>
misinformation†about Ripple’s alleged “dumping†of XRP and to address the “fear, uncertainty,
and doubt†about investing in XRP spread by others. Ripple thus held itself out as the legitimate
source of information essential for investors, inviting them to rely on what Ripple chose to disclose.
<span style="color: #cd0000;">-216.</span>
<span style="color: #00cd00;">+241.</span>
Based on these representations, Ripple’s actions, and the economic reality, XRP
investors in the Offering had a reasonable expectation of profiting from Ripple’s efforts to deploy
investor funds to create a use for XRP and bring demand and value to their common enterprise.
<span style="color: #00cd00;">+242.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+At all relevant times, Garlinghouse and Larsen knew or recklessly disregarded that</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+XRP investors had a reasonable expectation of profiting from Ripple’s efforts with respect to XRP.</span>
A.
Ripple Led Investors to Reasonably Expect that Ripple’s and Its Agents’
Entrepreneurial and Managerial Efforts Would Drive the Success or Failure of
Ripple’s XRP Projects
<span style="color: #cd0000;">-217.</span>
<span style="color: #00cd00;">+243.</span>
Defendants repeatedly stated publicly that they would undertake significant efforts to
develop and foster “uses†for XRP, so that banks, financial intermediaries, or other specialized
<span style="color: #cd0000;">-money transmitting businesses would want to buy it, including as alleged above in Section II. (The</span>
<span style="color: #cd0000;">-identity of the “users†to whom it would position XRP varied over the years as Ripple explored</span>
<span style="color: #cd0000;">-different strategies.)</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-36</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 37 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-218.</span>
<span style="color: #00cd00;">+money transmitting businesses would want to buy it, including as alleged above in Sections II and</span>
<span style="color: #00cd00;">+III. (The identity of the “users†to whom it would position XRP varied over the years as Ripple</span>
<span style="color: #00cd00;">+explored different strategies.)</span>
<span style="color: #00cd00;">+244.</span>
Defendants also persistently stated publicly that—partly to achieve the goal of
widespread XRP trading—they would take steps to create, promote, and protect the market for
trading in XRP, such as managing the manner in which Ripple bought and sold XRP, and by
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+42</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 43 of 79</span>
<span style="color: #00cd00;">+</span>
persuading digital asset trading platforms to permit investors to buy and sell XRP. These statements
led reasonable investors to expect to profit from Ripple’s efforts on behalf of XRP.
1.
Defendants Promised to Undertake Significant Efforts to Build Value for XRP
<span style="color: #cd0000;">-219.</span>
<span style="color: #00cd00;">+245.</span>
From the outset of the Offering, Defendants publicly promised significant,
meaningful entrepreneurial efforts with respect to XRP.
<span style="color: #cd0000;">-220.</span>
<span style="color: #00cd00;">+246.</span>
In an April 14, 2014 interview published online, Larsen explained that Ripple was
“helping to build in the Ripple protocol . . . the idea of an Internet-for-value exchange,†and that
Ripple saw “this as a SWIFT 2.0,†referring to the established inter-bank payment network.
<span style="color: #cd0000;">-221.</span>
<span style="color: #00cd00;">+247.</span>
<span style="color: #cd0000;">-In approximately April 2014, Ripple created “The Ripple Protocol: A Deep Dive for</span>
<span style="color: #00cd00;">+In approximately April 2014, Ripple created the 2014 Promotional Document, which</span>
<span style="color: #cd0000;">-Financial Professionals†(the “2014 Promotional Documentâ€), which Ripple distributed publicly.</span>
<span style="color: #cd0000;">-222.</span>
<span style="color: #00cd00;">+Ripple distributed publicly.</span>
<span style="color: #00cd00;">+248.</span>
In the 2014 Promotional Document, Ripple purported to examine the “Sources of
<span style="color: #00cdcd;">@@ -1901,25 +2156,24 @@</span>
unknown,†but predicted “increased speculative interest, which may have significant impacts on
price,†if the Ripple network became more well-known or used, in which case Ripple concluded that
it “expect[ed] the demand for XRP to be considerable.â€
<span style="color: #cd0000;">-223.</span>
<span style="color: #00cd00;">+249.</span>
<span style="color: #cd0000;">-In the 2014 Promotional Document, Ripple held itself out the key party who would</span>
<span style="color: #00cd00;">+In the 2014 Promotional Document, Ripple held itself out as the key party who</span>
<span style="color: #cd0000;">-make these efforts with respect to XRP and the Ripple protocol, including by promising to</span>
<span style="color: #00cd00;">+would make these efforts with respect to XRP and the Ripple protocol, including by promising to</span>
“distribute [certain XRP] to incent the participation of market makers, gateways and consumers to
utilize the protocol,†and highlighting Ripple’s past “business development efforts.†Ripple also
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-37</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 38 of 71</span>
<span style="color: #cd0000;">-</span>
noted that it had recruited a “diverse set of talented individuals with experience in relevant
technology and financial services companies†for these efforts and would enlist others to assist.
<span style="color: #cd0000;">-224.</span>
<span style="color: #00cd00;">+250.</span>
Ripple repeated these types of promotional statements throughout the Offering.
<span style="color: #cd0000;">-225.</span>
<span style="color: #00cd00;">+43</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 44 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+251.</span>
On June 3, 2016, Cryptographer-1 explained in the XRP Chat, in response to the
<span style="color: #00cdcd;">@@ -1927,7 +2181,7 @@</span>
us, though it’s possible.†But, he continued, while “there are significant technical obstacles to using
XRP as a bridge or vehicle currency[,] . . . [o]ur XRP strategy is based on promoting it as a bridging
currency . . . through various strategies including paying traders an incentive.â€
<span style="color: #cd0000;">-226.</span>
<span style="color: #00cd00;">+252.</span>
On January 21, 2017, Cryptographer-1 represented in the XRP Chat that Ripple was
<span style="color: #00cdcd;">@@ -1935,7 +2189,7 @@</span>
“several strategies†to do so. Months later, on September 12, 2017, he posted on Reddit that Ripple
had previously explained that it “will work to get XRP adopted for th[e] purpose†of serving as a
“new intermediary asset†and noted “why that would be expected to create demand for XRP.â€
<span style="color: #cd0000;">-227.</span>
<span style="color: #00cd00;">+253.</span>
In an email to Ripple’s equity shareholders, advisors, and others on June 5, 2017,
<span style="color: #00cdcd;">@@ -1955,25 +2209,25 @@</span>
approximately 500 percent in the last 30 days and over 5,000 percent from
the beginning of 2017! . . . In fact, factoring in the approx. $18 billion of XRP
we own, Ripple is worth more than all but four US start-ups.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-38</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 39 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-228.</span>
<span style="color: #00cd00;">+254.</span>
In the same email, Garlinghouse reminded Ripple’s equity investors and advisors that
Ripple remained “committed to making XRP the best digital asset for payments†and that XRP had
“technical superiority compared to other digital assets.â€
<span style="color: #cd0000;">-229.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+44</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 45 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+255.</span>
Garlinghouse had made statements similar to these in an article posted on Ripple’s
website on May 16, 2017. A few months later, in a December 7, 2017 post on its website, Ripple,
confirming the formation of the XRP Escrow, once more reiterated Garlinghouse’s statements in
the May 16, 2017 article and the June 5, 2017 email, described above.
<span style="color: #cd0000;">-230.</span>
<span style="color: #00cd00;">+256.</span>
In a December 14, 2017 public interview, Garlinghouse explained Ripple’s market
<span style="color: #00cdcd;">@@ -1981,7 +2235,7 @@</span>
say, is XRP liquidity. Making sure . . . we are doing everything we can to make the XRP ecosystem
successful on a liquidity basis. Priority three which admittedly is kind of a newer priority and
something we’ll work on more in 2018, is investing in other use cases for the XRP Ledger.â€
<span style="color: #cd0000;">-231.</span>
<span style="color: #00cd00;">+257.</span>
In the Markets Report for the fourth quarter of 2017, Ripple stated that “it’s clear
<span style="color: #00cdcd;">@@ -1989,40 +2243,40 @@</span>
continues to seriously consider [XRP] as an alternate liquidity solution.†A Ripple executive
similarly explained his view in a Yahoo! Finance interview on approximately March 15, 2018, that
“the activities of the software company create value in . . . [XRP].â€
<span style="color: #cd0000;">-232.</span>
<span style="color: #00cd00;">+258.</span>
Also in the Markets Report for the fourth quarter of 2017, Ripple announced its
upcoming intended efforts to “work towards the launch of institutional hedging instruments and
custody solutions,†which “are important to institutional adoption [i.e., key forces in achieving
liquidity and price increases] and thus are important components of our 2018 roadmap.â€
<span style="color: #cd0000;">-233.</span>
<span style="color: #00cd00;">+259.</span>
On September 11, 2017, Cryptographer-1 told public markets via a post on Reddit
that, because “Ripple holds more than half the XRP in existence[,] . . . Ripple can justify spending
$100 million dollars on something if it would be expected to increase the long term price of XRP by
<span style="color: #00cd00;">+a penny.†Then, on November 17, 2017, he posted on Reddit about why Ripple had an incentive to</span>
<span style="color: #00cd00;">+continue these efforts and why it would continue these efforts: “[T]here is no rational reason why</span>
<span style="color: #cd0000;">-39</span>
<span style="color: #00cd00;">+45</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 40 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 46 of 79</span>
<span style="color: #cd0000;">-a penny.†Then, on November 17, 2017, he posted on Reddit about why Ripple had an incentive to</span>
<span style="color: #cd0000;">-continue these efforts and why it would continue these efforts: “[T]here is no rational reason why</span>
[Ripple] would not continue to execute [its] publicly announced strategy and do everything we can to
maximize the price of XRP over at least the time it takes us to sell the XRP we have.â€
<span style="color: #cd0000;">-234.</span>
<span style="color: #00cd00;">+260.</span>
On January 17, 2018, Garlinghouse tweeted an article he said was “[a] good read on
why fostering a healthy $XRP ecosystem is a top priority at @Ripple.â€
<span style="color: #cd0000;">-235.</span>
<span style="color: #00cd00;">+261.</span>
On February 17, 2020, Garlinghouse tied Ripple’s efforts to create “useâ€-driven
demand for XRP to a potential for an increase in XRP price, in an interview on the floor of the New
York Stock Exchange in Manhattan (the “NYSE Interviewâ€).
<span style="color: #cd0000;">-236.</span>
<span style="color: #00cd00;">+262.</span>
In the NYSE Interview, Garlinghouse answered questions about the price of digital
<span style="color: #00cdcd;">@@ -2037,12 +2291,12 @@</span>
Defendants Promised to Undertake Significant Efforts to Develop and Maintain a Public Market
for XRP Investors to Resell XRP
<span style="color: #cd0000;">-237.</span>
<span style="color: #00cd00;">+263.</span>
Starting in at least 2014, Ripple also promised that it would undertake efforts to
create, maintain, and protect secondary resale markets for XRP.
<span style="color: #cd0000;">-238.</span>
<span style="color: #00cd00;">+264.</span>
For example, starting in 2014, Ripple stated on its website: “[W]e will engage in
<span style="color: #00cdcd;">@@ -2050,19 +2304,19 @@</span>
against other currencies.†Years later, in announcing the XRP Escrow, Ripple reminded investors
that it “engaged in distribution strategies that we expect will result in a strengthening XRP exchange
rate against other currencies,†touting its “proven [four-year] track record of doing just that.â€
<span style="color: #cd0000;">-40</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 41 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-239.</span>
<span style="color: #00cd00;">+265.</span>
In a February 19, 2014 public interview, Larsen explained that one of Ripple’s “key
roles is making sure that we distribute [XRP] as broadly in a way that adds as much utility and
<span style="color: #00cd00;">+46</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 47 of 79</span>
<span style="color: #00cd00;">+</span>
liquidity as we possibly can.†He stated that he thought “our incentives are very well aligned . . . that
for Ripple Labs to do well we have to do a very good job in protecting the value of XRP and the
value of the network, and that really is the guiding principle here in our distribution of XRP.â€
<span style="color: #cd0000;">-240.</span>
<span style="color: #00cd00;">+266.</span>
In a May 16, 2017 article on Ripple’s website, Garlinghouse reminded investors that,
<span style="color: #00cdcd;">@@ -2070,46 +2324,46 @@</span>
goal in distributing XRP is to incentivize actions that build trust, utility and liquidity.†He concluded
that, to incentivize financial institutions, payment providers, and banks to “use†XRP (though none
had up to that point), Ripple “remain[ed] committed to increasing XRP liquidity.â€
<span style="color: #cd0000;">-241.</span>
<span style="color: #00cd00;">+267.</span>
In the Markets Report for the second quarter of 2019, Ripple promised to “focus
institutional sales on markets where the on-exchange liquidity for XRP is insufficient to meet
institutional demand,†which the report said was similar to what the company had done in 2017,
purportedly leading to increased liquidity and “listings†on digital asset trading platforms in general.
<span style="color: #cd0000;">-242.</span>
<span style="color: #00cd00;">+268.</span>
In the Markets Report for the second quarter of 2020, Ripple explained that, as part
of its “responsible role in the [XRP] liquidity process,†it had begun purchasing XRP in the
secondary market to ensure a “healthy, orderly XRP market.â€
<span style="color: #cd0000;">-243.</span>
<span style="color: #00cd00;">+269.</span>
Defendants engaged in many of these publicly-promised efforts with respect to XRP
<span style="color: #cd0000;">-markets, as alleged in Section III, above.</span>
<span style="color: #00cd00;">+markets, as alleged in Sections II and III, above.</span>
3.
Ripple Touted the Ability of Its Team to Succeed in Its Promised Efforts
<span style="color: #cd0000;">-244.</span>
<span style="color: #00cd00;">+270.</span>
In connection with the efforts Defendants promised the markets they would
undertake, Ripple at times highlighted the experience, expertise, and abilities of the “team†it had
assembled, which included Ripple employees, business partners, and other agents.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-41</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 42 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-245.</span>
<span style="color: #00cd00;">+271.</span>
In 2013, Ripple Agent-1 explained in the Ripple Forum that Ripple’s fundraising
efforts through selling XRP “allows Ripple Labs to have a spectacularly skilled team to develop and
promote the Ripple protocol and network.â€
<span style="color: #cd0000;">-246.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+47</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 48 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+272.</span>
In a Reddit post in 2017, Cryptographer-1 was asked to explain if there was a risk
<span style="color: #00cdcd;">@@ -2121,13 +2375,13 @@</span>
Ripple Publicly Touted the Efforts That It Did Actually Undertake
<span style="color: #cd0000;">-247.</span>
<span style="color: #00cd00;">+273.</span>
During the Offering, not only did Ripple promise efforts that could lead to the
increase in value of XRP, it actually made and touted extensive entrepreneurial and managerial
efforts—made with proceeds from the Offering—to the market.
<span style="color: #cd0000;">-248.</span>
<span style="color: #00cd00;">+274.</span>
In its 2016 “Year In Review†summary, posted on its website on December 28,
<span style="color: #00cdcd;">@@ -2137,32 +2391,32 @@</span>
had not sold a single XRP to any “user,†Ripple commented that “[g]ood news for XRP kept
coming later in the spring†with the announcement of a partnership with a facility to trade in XRP
derivatives.
<span style="color: #cd0000;">-249.</span>
<span style="color: #00cd00;">+275.</span>
In the first Markets Report, published on January 24, 2017, Ripple touted its
announcement of XRP investors’ ability to buy and sell XRP on a new digital asset trading platform
as “part of a continued effort to expand the XRP ecosystem.â€
<span style="color: #cd0000;">-250.</span>
<span style="color: #00cd00;">+276.</span>
On February 15, 2017, Ripple Agent-2 tweeted a link to an article, posted on a digital
asset discussion blog, about Ripple’s efforts to enlist companies to assist in its managerial efforts as
<span style="color: #00cd00;">+to XRP. The article discussed Ripple’s efforts to select a partner to help it build “functionality for</span>
<span style="color: #00cd00;">+XRP†and directed readers to Ripple’s website on “How to Buy XRP.â€</span>
<span style="color: #cd0000;">-42</span>
<span style="color: #00cd00;">+48</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 43 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 49 of 79</span>
<span style="color: #cd0000;">-to XRP. The article discussed Ripple’s efforts to select a partner to help it build “functionality for</span>
<span style="color: #cd0000;">-XRP†and directed readers to Ripple’s website on “How to Buy XRP.â€</span>
<span style="color: #cd0000;">-251.</span>
<span style="color: #00cd00;">+277.</span>
As alleged above in Sections III and IV.A.1, Ripple and Garlinghouse made many
statements in connection with the announcement of the XRP Escrow, reminding investors that
Ripple had been a good “steward†of XRP, purportedly based on the ways Ripple had chosen to
make its own market sales of XRP.
<span style="color: #cd0000;">-252.</span>
<span style="color: #00cd00;">+278.</span>
In an interview on Bloomberg News Network (“Bloomberg Newsâ€) in
<span style="color: #00cdcd;">@@ -2176,7 +2430,7 @@</span>
really reduce the friction, and we’re talking about a multi-trillion dollar problem
. . . yes, there’s going to be demand for that, when you have fixed supply . . .
and you see increase in demand, prices go up.
<span style="color: #cd0000;">-253.</span>
<span style="color: #00cd00;">+279.</span>
In a CNBC interview on March 7, 2018, Garlinghouse reminded investors that
<span style="color: #00cdcd;">@@ -2184,7 +2438,7 @@</span>
own a lot of XRP.†Thus, he continued, Ripple had “invested in venture funds . . . in hedge funds
. . . in companies, [and] . . . partnered with payment providers [and] . . . market makers, in order to
make sure that XRP is the most useful asset out there for solving a cross border payment problem.â€
<span style="color: #cd0000;">-254.</span>
<span style="color: #00cd00;">+280.</span>
On April 11, 2018, Ripple tweeted from the handle @Ripple that it “had invested
<span style="color: #00cdcd;">@@ -2192,11 +2446,12 @@</span>
use cases beyond payments.†Ripple Agent-3 similarly tweeted: “Ripple’s $25 million investment in
@blockchaincap’s new fund is the first and not the last contribution to ventures that further develop
the #blockchain and $XRP ecosystems.â€
<span style="color: #cd0000;">-43</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 44 of 71</span>
<span style="color: #00cd00;">+49</span>
<span style="color: #cd0000;">-255.</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 50 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+281.</span>
At various times, Ripple publicly touted that it was making certain of the XRP
<span style="color: #00cdcd;">@@ -2207,7 +2462,7 @@</span>
Economic Reality Dictates that XRP Purchasers Have No Choice But to Rely on Ripple’s Efforts
for the Success or Failure of Their Investment
<span style="color: #cd0000;">-256.</span>
<span style="color: #00cd00;">+282.</span>
Economic reality has also led reasonable investors to expect that Ripple and its
<span style="color: #00cdcd;">@@ -2215,25 +2470,26 @@</span>
accordingly understanding that Ripple has the economic incentive and capacity to undertake efforts
to promote XRP and the XRP Ledger, which would serve Ripple’s economic interest and that of all
XRP owners equally.
<span style="color: #cd0000;">-257.</span>
<span style="color: #00cd00;">+283.</span>
<span style="color: #cd0000;">-Indeed, the XRP market capitalization as of last week (approximately $58 billion) and</span>
<span style="color: #00cd00;">+Indeed, the XRP market capitalization as of December 2020 (approximately $58</span>
<span style="color: #cd0000;">-the value of Ripple’s XRP holdings (approximately $28 billion) each far exceed the value of the one</span>
<span style="color: #cd0000;">-product—ODL—that “uses†XRP (which “use†is not market-driven, but subsidized by Ripple).</span>
<span style="color: #cd0000;">-258.</span>
<span style="color: #00cd00;">+billion) and the value of Ripple’s XRP then holdings (approximately $28 billion) each far exceeded</span>
<span style="color: #00cd00;">+the value of the one product—ODL—that “uses†XRP (which “use†is not market-driven, but</span>
<span style="color: #00cd00;">+subsidized by Ripple).</span>
<span style="color: #00cd00;">+284.</span>
The economic reality is that reasonable investors are speculating that Ripple has the
incentive and potential to create demand for XRP. XRP investors are betting that Ripple may yet
solve Garlinghouse’s “trillion-dollar problem,†and they will profit as a result.
<span style="color: #cd0000;">-259.</span>
<span style="color: #00cd00;">+285.</span>
In contrast to Ripple, investors in XRP cannot take most or any of the steps that
Ripple has taken to grow the XRP ecosystem and increase demand for XRP. Most, if not all, XRP
investors simply lack the technical expertise and the resources to do so.
<span style="color: #cd0000;">-260.</span>
<span style="color: #00cd00;">+286.</span>
XRP investors are not in any position to, for example, undertake various, complex,
<span style="color: #00cdcd;">@@ -2241,25 +2497,24 @@</span>
protect XRP’s price, volume, and liquidity—as Ripple has done in a purported attempt to foster
adoption of XRP. Nor are XRP investors in any position to increase significantly “demand†or
“value†for XRP by developing a “use†for the token through entrepreneurial efforts—at least not
<span style="color: #00cd00;">+50</span>
<span style="color: #cd0000;">-44</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 45 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 51 of 79</span>
without Ripple’s support. In other words, not only are Ripple’s touted efforts with respect to XRP
significant, they are essential to the success or failure of the enterprise.
<span style="color: #cd0000;">-261.</span>
<span style="color: #00cd00;">+287.</span>
Investors in XRP do not exercise any control or authority over how Offering
proceeds have been or will be spent. Ripple possesses sole discretion to decide how to do so.
<span style="color: #cd0000;">-262.</span>
<span style="color: #00cd00;">+288.</span>
Because certain Ripple executives publicize that they hold XRP, and some (including
Garlinghouse) state that they hold it as an investment, it is reasonable for a holder of XRP to expect
these individuals to undertake efforts to increase the value and price of XRP.
<span style="color: #cd0000;">-263.</span>
<span style="color: #00cd00;">+289.</span>
Defendants’ statements and actions and the economic reality of Ripple’s relationship
<span style="color: #00cdcd;">@@ -2270,96 +2525,97 @@</span>
Purchasers of XRP Invested into a Common Enterprise
<span style="color: #cd0000;">-264.</span>
<span style="color: #00cd00;">+290.</span>
Investors who purchased XRP in the Offering invested into a common enterprise
with other XRP purchasers, as well as with Ripple.
<span style="color: #cd0000;">-265.</span>
<span style="color: #00cd00;">+291.</span>
Because XRP is fungible, the fortunes of XRP purchasers were and are tied to one
another, and each depend on the success of Ripple’s XRP Strategy. In other words, Ripple’s success
or failure in propelling trading of XRP drives demand for XRP, which will dictate investors’ profits
(recognized in increased prices at which they could sell XRP) or losses.
<span style="color: #cd0000;">-266.</span>
<span style="color: #00cd00;">+292.</span>
XRP investors stand to profit equally if XRP’s popularity and price increase, and no
investor will be entitled to a higher proportion of price increases. In other words, the price of XRP
rises and falls for XRP investors together and equally for all investors.
<span style="color: #cd0000;">-267.</span>
<span style="color: #00cd00;">+293.</span>
Moreover, Ripple pooled the funds it raised in the Offering and used them to fund
its operations, including to finance building out potential “use†cases for XRP, paying others to
assist it in developing a “use†case, constructing the digital platform it promoted, and compensating
<span style="color: #cd0000;">-45</span>
<span style="color: #00cd00;">+51</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 46 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 52 of 79</span>
executives recruited for these purposes. Ripple did not segregate or separately manage proceeds
<span style="color: #cd0000;">-from different XRP purchasers in the Offering. The nature of XRP itself made it the common</span>
<span style="color: #cd0000;">-thread among Ripple, its management, and all other XRP holders.</span>
<span style="color: #cd0000;">-268.</span>
<span style="color: #00cd00;">+from different XRP purchasers in the Offering, which Garlinghouse and Larsen knew or recklessly</span>
<span style="color: #00cd00;">+disregarded at all relevant times. The nature of XRP itself made it the common thread among</span>
<span style="color: #00cd00;">+Ripple, its management, and all other XRP holders.</span>
<span style="color: #00cd00;">+294.</span>
Defendants recognized and repeatedly emphasized these common interests to
prospective investors, including by explaining to the market that Ripple used proceeds from XRP
sales to fund its operations and that Ripple wanted XRP to succeed.
<span style="color: #cd0000;">-269.</span>
<span style="color: #00cd00;">+295.</span>
For example, from the outset of Ripple’s operations, Ripple Agent-1 and
Cryptographer-1 made publicly clear that Ripple would sell XRP to raise funds for one common
enterprise: to fund its operations, as described below.
<span style="color: #cd0000;">-270.</span>
<span style="color: #00cd00;">+296.</span>
On March 10, 2013, Cryptographer-1 explained in the Ripple Forum on Ripple’s
website that Ripple’s “source of revenue is the sale of XRP.â€
<span style="color: #cd0000;">-271.</span>
<span style="color: #00cd00;">+297.</span>
A few months later, on August 28, 2013, Ripple Agent-1 echoed that sentiment,
stating that Ripple “wholesales XRP to fund operations.â€
<span style="color: #cd0000;">-272.</span>
<span style="color: #00cd00;">+298.</span>
On September 2, 2013, Ripple Agent-1 again noted on the Ripple Forum that Ripple
“is funded by investments and the sale of XRP.â€
<span style="color: #cd0000;">-273.</span>
<span style="color: #00cd00;">+299.</span>
Similarly, the next year, in its 2014 Promotional Document, Ripple explained its
“plans to retain 25% of all XRP issued to fund operations (and hopefully turn a profit).â€
<span style="color: #cd0000;">-274.</span>
<span style="color: #00cd00;">+300.</span>
This public disclosure echoed Larsen’s explanation, in an online interview dated
April 14, 2014, that Ripple was “keeping 25% of . . . XRP . . . to cover the bills.†When asked about
Ripple’s business model, Larsen reminded readers that Ripple was “keeping 25% of those XRP, and
using the rest of it to incent market makers, gateways, consumers to come onto the protocol.â€
<span style="color: #cd0000;">-275.</span>
<span style="color: #cd0000;">-From at least 2014 through at least 2017, Ripple made a similar representation in the</span>
<span style="color: #00cd00;">+52</span>
<span style="color: #cd0000;">-Ripple Wiki: “Ripple Labs sells XRP to fund its operations and promote the network. This allows</span>
<span style="color: #cd0000;">-Ripple Labs to have a spectacularly skilled team to develope [sic] and promote the Ripple protocol.â€</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 53 of 79</span>
<span style="color: #cd0000;">-46</span>
<span style="color: #00cd00;">+301.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 47 of 71</span>
<span style="color: #00cd00;">+From at least 2014 through at least 2017, Ripple made a similar representation in the</span>
<span style="color: #cd0000;">-276.</span>
<span style="color: #00cd00;">+Ripple Wiki: “Ripple Labs sells XRP to fund its operations and promote the network. This allows</span>
<span style="color: #00cd00;">+Ripple Labs to have a spectacularly skilled team to develope [sic] and promote the Ripple protocol.â€</span>
<span style="color: #00cd00;">+302.</span>
Ripple also made clear that the common interest was not just any interest, but a
specific interest in XRP’s price increasing, as Ripple’s (significant) XRP holdings were essentially its
only asset. For example, in his Ripple Forum post from September 2013, Ripple Agent-1 stated that
Ripple’s “business model is to hold XRP in the hope that it will have value.â€
<span style="color: #cd0000;">-277.</span>
<span style="color: #00cd00;">+303.</span>
At times, Ripple used the terms “value†and “price†interchangeably. In one early
<span style="color: #00cdcd;">@@ -2370,55 +2626,55 @@</span>
or something you care about as a primary driver of business.†Garlinghouse said: “[A] healthy
$XRP market and healthy $XRP ecosystem is CRITICALLY important to me. And it is indeed a
primary driver. Long-term price will reflect success driving institutional use of $XRP.â€
<span style="color: #cd0000;">-278.</span>
<span style="color: #00cd00;">+304.</span>
In 2014, the Promotional Document explained Ripple’s view that, “as demand for
XRP grows, the value of XRP should appreciate†and that, therefore, “Ripple Labs believes that its
incentives are aligned with those of protocol’s users.â€
<span style="color: #cd0000;">-279.</span>
<span style="color: #00cd00;">+305.</span>
Cryptographer-1 has repeatedly and publicly expressed that Ripple’s incentives are
aligned with other XRP holders’—specifically, as to increasing Ripple’s price—because Ripple
“holds a huge pile of XRP,†including in a statement he made on XRP Chat on May 25, 2017.
<span style="color: #cd0000;">-280.</span>
<span style="color: #00cd00;">+306.</span>
Garlinghouse in particular frequently encouraged investors to view their economic
interests as aligned with Ripple’s.
<span style="color: #cd0000;">-281.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+53</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 54 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+307.</span>
As alleged above, on January 17, 2018, Garlinghouse tweeted an article discussing
Ripple’s remaining supply of XRP. Garlinghouse’s tweet noted that Ripple was not selling all of its
remaining XRP supply, and that the article was “[a] good read on why fostering a healthy $XRP
ecosystem is a top priority at @Ripple.â€
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-47</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 48 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-282.</span>
<span style="color: #00cd00;">+308.</span>
The following month, in an interview on February 11, 2018, Garlinghouse
acknowledged: “Ripple the company, as the owner of 61% of the tokens today, is the most
interested party in the success of the XRP ecosystem.â€
<span style="color: #cd0000;">-283.</span>
<span style="color: #00cd00;">+309.</span>
Similarly, on March 7, 2018 in a CNBC interview, Garlinghouse stated: “There’s no
party more interested in the success of the XRP ecosystem than Ripple. We want that to be
massively successful because we own a lot of XRP.â€
<span style="color: #cd0000;">-284.</span>
<span style="color: #00cd00;">+310.</span>
Garlinghouse publicly reiterated sentiments similar to these on March 7, 2018 in an
interview with the Financial Times and again on August 13, 2020 in an interview with a major
financial publication, where he said: “We are a capitalist, we own a lot of XRP. So do I care about
the overall XRP market? 100 per cent.â€
<span style="color: #cd0000;">-285.</span>
<span style="color: #00cd00;">+311.</span>
On October 8, 2019 in a speech at the Economic Club of New York in Manhattan
<span style="color: #00cdcd;">@@ -2426,29 +2682,29 @@</span>
XRP. So clearly we’re very interested in the health and success of that [XRP] ecosystem.†Asked
about Ripple’s “revenue model,†he explained that while Ripple has software it sells, “it owns a lot
of this digital asset†and that “[a]nything we do that is good for that digital asset is good for us.â€
<span style="color: #cd0000;">-286.</span>
<span style="color: #00cd00;">+312.</span>
Currently, Ripple continues to make clear on its website that it holds at least 54
billion XRP, making it by far the largest single holder of the asset.
<span style="color: #cd0000;">-287.</span>
<span style="color: #00cd00;">+313.</span>
The Legal Memos focused on this very fact—the existence of an identifiable actor
who held itself out as responsible for making efforts with respect to XRP—in distinguishing XRP
from bitcoin for purposes of the federal securities laws. The Legal Memos noted that, unlike with
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+54</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 55 of 79</span>
<span style="color: #00cd00;">+</span>
bitcoin, there was “a specific entity,†Ripple, “which is responsible for the distribution of [XRP] and
the promotion and marketing functions of the Ripple Network.â€
<span style="color: #cd0000;">-288.</span>
<span style="color: #00cd00;">+314.</span>
At least one Ripple equity shareholder (“Equity Investor Aâ€), a sophisticated
investor, understood this distinction. In an internal email on April 26, 2018, an Equity Investor A
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-48</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 49 of 71</span>
<span style="color: #cd0000;">-</span>
employee wondered whether the XRP Ledger was subject to a “51% attack†(a threat to the status
of the digital ledger), as he perceived the bitcoin blockchain to be. He concluded that it was “more
of a longer-term question given the current incentives of the stake holders,†meaning that Ripple
<span style="color: #00cdcd;">@@ -2459,7 +2715,7 @@</span>
Ripple Led Investors to Reasonably Expect a Profit from Their Investment
Derived from Defendants’ Efforts
<span style="color: #cd0000;">-289.</span>
<span style="color: #00cd00;">+315.</span>
Ripple also led investors to reasonably expect that they could reap a profit from their
<span style="color: #00cdcd;">@@ -2468,7 +2724,7 @@</span>
XRP; assuring investors that Ripple would take steps to protect the market for XRP, including by
fostering a readily available XRP trading market; highlighting XRP price increases and at times tying
them to Ripple’s efforts; and selling XRP to certain institutional investors at discounted prices.
<span style="color: #cd0000;">-290.</span>
<span style="color: #00cd00;">+316.</span>
Ripple made many of these statements in the Markets Reports, which typically
<span style="color: #00cdcd;">@@ -2479,31 +2735,31 @@</span>
Defendants’ Publicly Stated Goal Was to Increase “Demand†for XRP Through Their
Entrepreneurial and Managerial Efforts
<span style="color: #cd0000;">-291.</span>
<span style="color: #00cd00;">+317.</span>
Throughout the Offering, as alleged in Section IV.A.1, above, Defendants repeatedly
told investors that Ripple’s XRP-related efforts were meant to spur “demand†for XRP. Ripple at
times even explicitly tied the hope for an increase in demand to what any reasonable investor would
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+55</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 56 of 79</span>
<span style="color: #00cd00;">+</span>
understand an increase in demand to entail: an increase in XRP’s market price.
<span style="color: #cd0000;">-292.</span>
<span style="color: #00cd00;">+318.</span>
Ripple made other such statements encouraging investors to expect to profit from
Ripple’s efforts to create institutional demand for XRP. For example, in response to questions
about XRP’s declining market price during a March 14, 2018 interview, Garlinghouse explained that,
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-49</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 50 of 71</span>
<span style="color: #cd0000;">-</span>
if Ripple was “successful in building out the project of xCurrent and expanding the number of users
around xRapid, the price of XRP will take care of itself over a 3 to 5 year period.â€
2.
Ripple and Garlinghouse Assured Investors Ripple Would Protect the Trading Markets for XRP
<span style="color: #cd0000;">-293.</span>
<span style="color: #00cd00;">+319.</span>
Ripple executives confirmed in internal emails that one of Ripple’s goals in
<span style="color: #00cdcd;">@@ -2511,7 +2767,7 @@</span>
Markets Update†to certain Ripple executives, Ripple Agent-2 noted that “XRP activity in the last
few days has been impressive, to say the least,†and that this activity “seems to be driven by
speculation around the lockupâ€; and highlighted the 50% “rall[y]†in XRP’s price after Ripple Agent2 publicly mentioned the possibility of the XRP Escrow for the first time.
<span style="color: #cd0000;">-294.</span>
<span style="color: #00cd00;">+320.</span>
Ripple sought to assure investors that they could trust Ripple to protect the XRP
<span style="color: #00cdcd;">@@ -2525,34 +2781,34 @@</span>
Ripple and Garlinghouse Touted Investors’ Ability to Easily Buy and Sell XRP
<span style="color: #cd0000;">-295.</span>
<span style="color: #00cd00;">+321.</span>
Related to Ripple’s touting of its efforts to protect the trading markets for XRP,
Ripple touted the ability of investors to buy and sell XRP on digital asset trading platforms (none of
which had anything to do with “using†XRP in any way other than as a speculative vehicle).
<span style="color: #cd0000;">-296.</span>
<span style="color: #cd0000;">-Ripple undertook extensive efforts—starting in at least late 2015—to persuade digital</span>
<span style="color: #00cd00;">+56</span>
<span style="color: #cd0000;">-asset trading companies to permit investors to buy and sell XRP on their platforms, especially those</span>
<span style="color: #cd0000;">-that would make XRP tradable against the USD, as alleged in Section III.B.</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 57 of 79</span>
<span style="color: #cd0000;">-50</span>
<span style="color: #00cd00;">+322.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 51 of 71</span>
<span style="color: #00cd00;">+Ripple undertook extensive efforts—starting in at least late 2015—to persuade digital</span>
<span style="color: #cd0000;">-297.</span>
<span style="color: #00cd00;">+asset trading companies to permit investors to buy and sell XRP on their platforms, especially those</span>
<span style="color: #00cd00;">+that would make XRP tradable against the USD, as alleged in Section II.E.5 above.</span>
<span style="color: #00cd00;">+323.</span>
<span style="color: #cd0000;">-On May 18, 2017, Ripple Agent-3 tweeted: “Kraken [a digital asset trading platform]</span>
<span style="color: #00cd00;">+On May 18, 2017, Ripple Agent-3 tweeted that “[Platform B] [i]ntroduces New Fiat</span>
<span style="color: #cd0000;">-Introduces New Fiat Pairs for XRP Trading! USD, JPY, CAD, EUR @Ripple.â€</span>
<span style="color: #cd0000;">-298.</span>
<span style="color: #00cd00;">+Pairs for XRP Trading! USD, JPY, CAD, EUR @Ripple.â€</span>
<span style="color: #00cd00;">+324.</span>
In the Markets Report for the first quarter of 2017 Ripple touted another platform’s
“successful launch of XRP for USD, EUR, and BTC currency pairs†as a “bright spot†for XRP.
<span style="color: #cd0000;">-299.</span>
<span style="color: #00cd00;">+325.</span>
In a follow-up to his June 5, 2017 email described above, Garlinghouse
<span style="color: #00cdcd;">@@ -2562,7 +2818,7 @@</span>
Garlinghouse responded, among other things, that “for XRP more specifically,†Ripple
“announcements about new exchanges listing XRP . . . continues to create tailwinds,†and that
Ripple would continue making these efforts, “which should hopefully drive some tailwinds.â€
<span style="color: #cd0000;">-300.</span>
<span style="color: #00cd00;">+326.</span>
On December 14, 2017, Garlinghouse stated on Ripple’s YouTube Channel: “Today
<span style="color: #00cdcd;">@@ -2570,60 +2826,60 @@</span>
exchanges that are reputable and regulated in those appropriate markets. So it is a very high priority
for us to be listed more broadly but you know we’re going to continue working on that with
partners around the globe.â€
<span style="color: #cd0000;">-301.</span>
<span style="color: #00cd00;">+327.</span>
Ripple itself publicly noted the importance of XRP being traded on digital asset
trading platforms. In articles published on its website on December 21, 2017 and January 18, 2018,
Ripple noted: “[I]t’s a top priority for Ripple to have XRP listed on top digital asset exchanges. . . .
Ripple has dedicated resources to the initiatives so you can expect ongoing progress.â€
<span style="color: #cd0000;">-302.</span>
<span style="color: #00cd00;">+328.</span>
That day, Ripple also tweeted about “XRP Available on 50+ Exchanges.â€
<span style="color: #00cd00;">+57</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 58 of 79</span>
<span style="color: #00cd00;">+</span>
4.
Ripple and Garlinghouse Touted XRP as an Investment, Including by Highlighting XRP Price
Increases
<span style="color: #cd0000;">-303.</span>
<span style="color: #00cd00;">+329.</span>
Ripple and Garlinghouse also encouraged reasonable investors to view the purchase
of XRP as something from which they could profit by persistently touting increases in XRP’s price.
<span style="color: #cd0000;">-51</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 52 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-304.</span>
<span style="color: #00cd00;">+330.</span>
In a January 18, 2017 email, Garlinghouse told an XRP investor that “XRP had a
good year in 2016—with significant increases in price and volume—which in turn has increased
investor interest.â€
<span style="color: #cd0000;">-305.</span>
<span style="color: #00cd00;">+331.</span>
On March 24, 2017, Ripple tweeted: “The price of #XRP continues to surge
showing that people are looking for #bitcoin alternatives.â€
<span style="color: #cd0000;">-306.</span>
<span style="color: #00cd00;">+332.</span>
On May 3, 2017, Ripple tweeted: “#Ripple adoption is sparking interest in XRP
‘which has had an impressive rally in the last two months’ via @Nasdaq.â€
<span style="color: #cd0000;">-307.</span>
<span style="color: #00cd00;">+333.</span>
Two days later, on May 5, 2017, Cryptographer-1 tweeted, along with a picture of
champagne, that he “finally got to drink the champagne [he was] reserving for #XRP at $0.10.â€
<span style="color: #cd0000;">-308.</span>
<span style="color: #00cd00;">+334.</span>
On June 29, 2017, Ripple tweeted a clip of an interview Garlinghouse gave on
CNBC with the caption: “#XRP – up 4000% this year – has shown the market favors a real use
case for #digitalassets.†Garlinghouse also predicted that “digital assets broadly are in a position to
be more useful than gold as a value transfer†and described XRP as “solving a real-world use case.â€
<span style="color: #cd0000;">-309.</span>
<span style="color: #00cd00;">+335.</span>
In the Markets Report for the third quarter of 2017, published October 19, 2017,
<span style="color: #00cdcd;">@@ -2631,43 +2887,42 @@</span>
meaningful spike in XRP†and that this rise in price lacked any “corresponding rally in [bitcoin] and
[the digital asset referred to as ETH],†noting that XRP’s price was “at times overwhelmingly
independent†from that of bitcoin and ETH.
<span style="color: #cd0000;">-310.</span>
<span style="color: #00cd00;">+336.</span>
On December 7, 2017, when the XRP Escrow began, Ripple tweeted: “55B $XRP is
now in escrow. Interested in what this means for $XRP markets?†Garlinghouse similarly tweeted:
“Boom! 55B $XRP now in escrow. Good for supply predictability and trusted, healthy $XRP
<span style="color: #00cd00;">+58</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 59 of 79</span>
<span style="color: #00cd00;">+</span>
markets. Glad to finally let this #cryptokitty out of the bag!â€
<span style="color: #cd0000;">-311.</span>
<span style="color: #00cd00;">+337.</span>
A week later, on December 12, 2017, Garlinghouse retweeted Institutional Investor
C’s tweet: “Wow, XRP at all time high! Forget bitcoin, we’re all in on XRP!â€
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-52</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 53 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-312.</span>
<span style="color: #00cd00;">+338.</span>
Later that month, on December 22, 2017, Garlinghouse tweeted an article discussing
how “Ripple Soars at Year End,†with the caption “I’ll let the headline speak for itself. $xrp.â€
<span style="color: #cd0000;">-313.</span>
<span style="color: #00cd00;">+339.</span>
Ripple did not limit its touting of XRP purchases as a potential means for investors
to profit only to increases in XRP prices in the abstract. Frequently, Ripple explicitly tied actual or
potential XRP investment returns to Ripple’s completed or upcoming efforts—both with respect to
developing demand for XRP and to protecting the XRP markets themselves.
<span style="color: #cd0000;">-314.</span>
<span style="color: #00cd00;">+340.</span>
In connection with a significant rise in the price of XRP on March 23, 2017, Ripple
explained in the Markets Report for the first quarter of 2017 that “key [Ripple] developments may
have had an impact[,]†including statements by Ripple “about its commitment to XRP and the
Ripple Consensus Ledger (RCL) as part of its long-term strategy.â€
<span style="color: #cd0000;">-315.</span>
<span style="color: #00cd00;">+341.</span>
In the Markets Report for the second quarter of 2017, Ripple noted that various
<span style="color: #00cdcd;">@@ -2676,7 +2931,7 @@</span>
in the following quarter. Ripple also stated that “[t]here were a number of significant
announcements and events which clearly contributed to XRP’s incredible second quarter,†reflected
by a “stunning QoQ [price] increase of 1[,]159%†and “YTD [year to date] growth of 3[,]977%.â€
<span style="color: #cd0000;">-316.</span>
<span style="color: #00cd00;">+342.</span>
Garlinghouse himself was a particularly persistent spokesperson for Ripple’s efforts
<span style="color: #00cdcd;">@@ -2684,19 +2939,19 @@</span>
millions of XRP, Garlinghouse frequently told investors that he was invested in XRP, and that he
was bullish on the investment. Throughout the Offering and as XRP’s price fluctuated, he also
encouraged investors to be patient and look at the price of XRP on a longer time horizon.
<span style="color: #cd0000;">-317.</span>
<span style="color: #cd0000;">-For example, in the June 5, 2017 email described above, Garlinghouse noted that</span>
<span style="color: #00cd00;">+59</span>
<span style="color: #cd0000;">-Ripple’s efforts to develop uses for XRP and the XRP Escrow had “translated into significant</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 60 of 79</span>
<span style="color: #cd0000;">-53</span>
<span style="color: #00cd00;">+343.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 54 of 71</span>
<span style="color: #00cd00;">+For example, in the June 5, 2017 email described above, Garlinghouse noted that</span>
<span style="color: #00cd00;">+Ripple’s efforts to develop uses for XRP and the XRP Escrow had “translated into significant</span>
improvements in both the liquidity (trading volume) and price of XRP,†which was “up
approximately 500 percent in the last 30 days and over 5,000 percent from the beginning of 2017!â€
<span style="color: #cd0000;">-318.</span>
<span style="color: #00cd00;">+344.</span>
In a follow-up to that email, an individual asked Garlinghouse to explain “what
<span style="color: #00cdcd;">@@ -2705,12 +2960,12 @@</span>
. . . as Ripple has done well in announcing customers – that has driven market interest in buying
XRP as a speculative investment.†He then gave examples of such Ripple announcements that were
“catalysts to this market rally†or that “furthered the rally.â€
<span style="color: #cd0000;">-319.</span>
<span style="color: #00cd00;">+345.</span>
Later, in a September 11, 2017 interview on CNBC, Garlinghouse noted Ripple’s
supposed success as a company and stated: “I think that’s increased the value of XRP.â€
<span style="color: #cd0000;">-320.</span>
<span style="color: #00cd00;">+346.</span>
The following month, during an October 18, 2017, question-and-answer session at a
<span style="color: #00cdcd;">@@ -2720,7 +2975,7 @@</span>
stated, in response to a question about XRP’s price, that he had “no qualms saying definitively if we
continue to drive the success we’re driving, we’re going to drive a massive amount of demand for
XRP, because we’re solving a multi-trillion dollar problem.â€
<span style="color: #cd0000;">-321.</span>
<span style="color: #00cd00;">+347.</span>
Similarly, in a November 2017 interview with CNBC, Garlinghouse noted: “On a
<span style="color: #00cdcd;">@@ -2728,14 +2983,14 @@</span>
XRP.†He repeated the sentiment the following month, in a December 14, 2017 interview with
Bloomberg News. When asked if he invested in XRP, he said: “I’m long XRP, I’m very, very long
XRP as a percentage of my personal . . . balance sheet†(though he had already sold at least 67
<span style="color: #cd0000;">-million XRP). Later, he reiterated, “I remain very, very, very long XRP, . . . I’m on the HODL</span>
<span style="color: #cd0000;">-side,†referring to a digital asset industry term meaning to be long on an asset for long-term gains.</span>
<span style="color: #cd0000;">-54</span>
<span style="color: #00cd00;">+60</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 55 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 61 of 79</span>
<span style="color: #cd0000;">-322.</span>
<span style="color: #00cd00;">+million XRP). Later, he reiterated, “I remain very, very, very long XRP, . . . I’m on the HODL</span>
<span style="color: #00cd00;">+side,†referring to a digital asset industry term meaning to be long on an asset for long-term gains.</span>
<span style="color: #00cd00;">+348.</span>
In a March 12, 2018 interview with Bloomberg News, Garlinghouse, noting the
<span style="color: #00cdcd;">@@ -2745,7 +3000,7 @@</span>
trillions of dollars, then there is a lot of opportunity to create value in XRP.†Garlinghouse also
speculated in the December 14, 2017 interview that, if a company created “utility†for a digital asset
like XRP, “then there will be demand for the tokens, [and] the price of the tokens will go up.â€
<span style="color: #cd0000;">-323.</span>
<span style="color: #00cd00;">+349.</span>
In the NYSE Interview, when the interviewer asked, “[s]o, XRP, is that a good
<span style="color: #00cdcd;">@@ -2756,70 +3011,75 @@</span>
Ripple’s Privately-Stated Goal Was to Increase Speculation on the Price of XRP
<span style="color: #cd0000;">-324.</span>
<span style="color: #00cd00;">+350.</span>
As these public statements show, speculative investment in XRP was precisely what
Ripple wanted and promoted—it needed speculative investment for its own stated strategy to be
successful and to increase the value of and monetize its XRP holdings.
<span style="color: #cd0000;">-325.</span>
<span style="color: #00cd00;">+351.</span>
Ripple explicitly stated these goals internally, including in documents describing one
of the reasons to establish the XRP Escrow as securing speculative liquidity, with the hopes that it
would lead to “immediate increase in volume and price appreciation.â€
<span style="color: #cd0000;">-326.</span>
<span style="color: #00cd00;">+352.</span>
Ripple Agent-3’s March 31, 2017 “Q2 [second quarter] XRP Plan Update†email to
Garlinghouse acknowledged that Ripple was taking most of the steps described above to encourage
speculative investment in XRP. He also told Garlinghouse that “[t]he goal [was] to drive XRP
speculative trading volume†and that the “tactics†Ripple planned to undertake to do so included
<span style="color: #cd0000;">-“escrow announcement,†“[s]ign[ing] exchanges,†putting out information into the market to “tak[e]</span>
<span style="color: #cd0000;">-on skeptics,†and announcing business deals to “[s]park speculation about potential partnerships.â€</span>
<span style="color: #cd0000;">-55</span>
<span style="color: #00cd00;">+61</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 56 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 62 of 79</span>
<span style="color: #00cd00;">+“escrow announcement,†“[s]ign[ing] exchanges,†putting out information into the market to “tak[e]</span>
<span style="color: #00cd00;">+on skeptics,†and announcing business deals to “[s]park speculation about potential partnerships.â€</span>
6.
XRP’s Characteristics—as Constructed by Ripple—Reasonably Fueled Purchasers’ Expectations
of Profiting
<span style="color: #cd0000;">-327.</span>
<span style="color: #00cd00;">+353.</span>
The very nature of XRP in the market—as constructed and promoted by Ripple—
compels reasonable XRP purchasers to view XRP as an investment.
<span style="color: #cd0000;">-328.</span>
<span style="color: #00cd00;">+354.</span>
Except for certain trading volume limitations, XRP is freely transferable or tradeable
without restrictions the moment it is purchased, and it was offered broadly and widely to all
potential purchasers, not just those who might be reasonably expected to “use†XRP.
<span style="color: #cd0000;">-329.</span>
<span style="color: #00cd00;">+355.</span>
Ripple made certain Institutional Sales of XRP at discounted priced, leading
purchasers to reasonably expect to profit on their resale of XRP into the public markets.
<span style="color: #cd0000;">-330.</span>
<span style="color: #00cd00;">+356.</span>
Moreover, the value of Ripple’s current holdings of XRP (approximately $28 billion
<span style="color: #cd0000;">-as of last week) and of XRP’s total market capitalization of approximately $58 billion—given that, as</span>
<span style="color: #cd0000;">-Garlinghouse has publicly stated, Ripple “would not be profitable or cash flow positive†without</span>
<span style="color: #cd0000;">-selling XRP—demonstrates that XRP investors are speculating that Ripple will achieve its stated</span>
<span style="color: #cd0000;">-goals with respect to XRP. In other words, market participants, when they buy XRP, are speculating</span>
<span style="color: #cd0000;">-that Ripple’s economic incentives and its promises with respect to XRP will lead it to successfully</span>
<span style="color: #cd0000;">-solve the “trillion-dollar problem†that will increase demand for XRP.</span>
<span style="color: #cd0000;">-331.</span>
<span style="color: #00cd00;">+as of December 2020) and of XRP’s then total market capitalization of approximately $58 billion—</span>
<span style="color: #00cd00;">+given that, as Garlinghouse has publicly stated, Ripple “would not be profitable or cash flow</span>
<span style="color: #00cd00;">+positive†without selling XRP—demonstrates that XRP investors are speculating that Ripple will</span>
<span style="color: #00cd00;">+achieve its stated goals with respect to XRP. In other words, market participants, when they buy</span>
<span style="color: #00cd00;">+XRP, are speculating that Ripple’s economic incentives and its promises with respect to XRP will</span>
<span style="color: #00cd00;">+lead it to successfully solve the “trillion-dollar problem†that will increase demand for XRP.</span>
<span style="color: #00cd00;">+357.</span>
As Garlinghouse summed it up in a December 29, 2017 interview with Bloomberg
News, XRP’s current market value and Ripple’s holdings of XRP “gives [them] a huge strategic asset
to go invest in and accelerate the vision we see for an internet of value. . . . For me this is all . . .
about an opportunity to participate and accelerate a vision we’ve had for some time.â€
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+62</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 63 of 79</span>
<span style="color: #00cd00;">+</span>
V.
In the Offering, Ripple Did Not Sell XRP for “Use†or as “Currencyâ€
<span style="color: #00cdcd;">@@ -2828,23 +3088,18 @@</span>
No Significant Non-Investment “Use†for XRP Exists, and Ripple Did Not
Sell XRP in the Offering for “Useâ€
<span style="color: #cd0000;">-332.</span>
<span style="color: #00cd00;">+358.</span>
The first potential use that Defendants touted for XRP—to serve as a “universal
digital asset†and/or for banks to transfer money—never materialized.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-56</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 57 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-333.</span>
<span style="color: #00cd00;">+359.</span>
Not until approximately mid-2018 did Ripple first begin earnestly testing ODL—to
date its only product that permits XRP use for any purpose. The potential “users†of ODL that
Ripple is targeting are money transmitters.
<span style="color: #cd0000;">-334.</span>
<span style="color: #00cd00;">+360.</span>
ODL involves a transaction in which a money transmitter in a sender’s jurisdiction
<span style="color: #00cdcd;">@@ -2852,128 +3107,133 @@</span>
XRP into the fiat currency of that locale. Typically, instead of holding XRP directly, money
transmitters who may use ODL would rely on market makers in the sender’s and recipient’s
jurisdictions to trade in and out of XRP in about ninety seconds or less.
<span style="color: #cd0000;">-335.</span>
<span style="color: #00cd00;">+361.</span>
ODL is an enterprise-grade software product intended for managing a financial
institution’s daily and long-term treasury operations—it is not intended for individual use.
<span style="color: #cd0000;">-336.</span>
<span style="color: #00cd00;">+362.</span>
On June 21, 2018, Garlinghouse explained in a public speech that nobody was using
XRP to effect cross-border transactions as of that date. Instead, he said that Ripple “expect[ed] this
year for at least one bank to use XRP in their payment flows, to use xRapid [ODL].â€
<span style="color: #cd0000;">-337.</span>
<span style="color: #00cd00;">+363.</span>
Ripple did not commercially launch ODL until October 2018.
<span style="color: #cd0000;">-338.</span>
<span style="color: #00cd00;">+364.</span>
Since its launch, ODL has gained very little traction, in part due to certain costs of
using the platform. From October 2018 through July 26, 2020, only fifteen money transmitters
(none of which are banks) signed on to potentially use ODL, and ODL transactions comprised no
more than 1.6% of XRP’s trading volume during any one quarter (and often substantially less).
<span style="color: #cd0000;">-339.</span>
<span style="color: #00cd00;">+365.</span>
Much of the onboarding onto ODL was not organic or market-driven. Rather, it
was subsidized by Ripple. Though Ripple touts ODL as a cheaper alternative to traditional payment
<span style="color: #00cd00;">+63</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 64 of 79</span>
<span style="color: #00cd00;">+</span>
rails, at least one money transmitter (the “Money Transmitterâ€) found it to be much more expensive
and therefore not a product it wished to use without significant compensation from Ripple.
<span style="color: #cd0000;">-340.</span>
<span style="color: #00cd00;">+366.</span>
Between early 2019 and July 2020, the “Money Transmitter†conducted the
overwhelming majority of XRP trading volume in connection with ODL. Ripple had to pay the
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-57</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 58 of 71</span>
<span style="color: #cd0000;">-</span>
Money Transmitter significant financial compensation—often paid in XRP—in exchange for the
<span style="color: #cd0000;">-Money Transmitter’s agreement to help Ripple increase volume on ODL.4</span>
<span style="color: #cd0000;">-341.</span>
<span style="color: #00cd00;">+Money Transmitter’s agreement to help Ripple increase volume on ODL. 4</span>
<span style="color: #00cd00;">+367.</span>
Specifically, from 2019 through June 2020, Ripple paid the Money Transmitter 200
million XRP, which the Money Transmitter immediately monetized by selling XRP into the public
market, typically on the very days it received XRP from Ripple. The Money Transmitter publicly
disclosed earning over $52 million in fees and incentives from Ripple through September 2020.
<span style="color: #cd0000;">-342.</span>
<span style="color: #00cd00;">+368.</span>
The Money Transmitter became yet another conduit for Ripple’s unregistered XRP
sales into the market, with Ripple receiving the added benefit that it could tout its inorganic XRP
“use†and trading volume for XRP. The Money Transmitter has served that principal purpose for
Ripple in exchange for significant financial compensation.
<span style="color: #cd0000;">-343.</span>
<span style="color: #00cd00;">+369.</span>
Ripple and Garlinghouse did not disclose to XRP investors or the public the full
extent of incentives that Ripple provided to the Money Transmitter in return for its assistance in
increasing XRP trading volume.
<span style="color: #cd0000;">-344.</span>
<span style="color: #00cd00;">+370.</span>
For example, in a September 12, 2019 interview on CNN, Garlinghouse refuted
speculation that Ripple was manufacturing demand for ODL and claimed: “When [the Money
Transmitter] is moving money from U.S. dollar to Mexican peso, they’re buying [XRP] at market.
There’s no special sweetheart deal there.†While the Money Transmitter was buying XRP in the
<span style="color: #cd0000;">-market at current market prices (not from Ripple), Garlinghouse did not disclose that Ripple was</span>
<span style="color: #cd0000;">-paying the Money Transmitter significant financial incentives to do so.</span>
<span style="color: #cd0000;">-345.</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Even after ODL’s launch, Ripple publicly acknowledged in July 2019 that XRP has</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-no significant use beyond investment, as alleged in paragraph 211 above.</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-4</span>
In June and November 2019, Ripple also made equity investments in the Money Transmitter
totaling $50 million in exchange for its stock and a seat on its Board of Directors. Ripple currently
holds approximately 9% of the Money Transmitter’s publicly-traded stock.
<span style="color: #cd0000;">-58</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 59 of 71</span>
<span style="color: #00cd00;">+4</span>
<span style="color: #cd0000;">-346.</span>
<span style="color: #00cd00;">+64</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 65 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+market at current market prices (not from Ripple), Garlinghouse did not disclose that Ripple was</span>
<span style="color: #00cd00;">+paying the Money Transmitter significant financial incentives to do so.</span>
<span style="color: #00cd00;">+371.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Even after ODL’s launch, Ripple publicly acknowledged in July 2019 that XRP has</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+no significant use beyond investment, as alleged in paragraph 236 above.</span>
<span style="color: #00cd00;">+372.</span>
Though it had started selling XRP to public investors in 2013, Ripple announced, for
the first time in its history in 2020, that it began selling XRP directly to money transmitters
specifically for effecting money transfers through ODL.
<span style="color: #cd0000;">-347.</span>
<span style="color: #00cd00;">+373.</span>
From May through mid-August 2020, Ripple sold XRP to two other money
transmitters for use in ODL for total proceeds of approximately $70 million dollars. In order to
effectuate the ODL transaction, the money transmitters then immediately resold those XRP into the
public markets, to individuals and entities that had no “use†for XRP.
<span style="color: #cd0000;">-348.</span>
<span style="color: #00cd00;">+374.</span>
Ripple earns only de minimis fees from the ODL platform. Instead, Garlinghouse
views “the value creation of xRapid [ODL] as driving the liquidity in the XRP markets.â€
<span style="color: #cd0000;">-349.</span>
<span style="color: #00cd00;">+375.</span>
Throughout the Offering, Defendants did not target sales of XRP to people to
whom XRP’s undeveloped, potential future “uses†could reasonably be expected to appeal. For
example, Defendants did not market XRP in the Offering to entities that might “use†XRP as a
bridge currency or even to individuals who had a need for an alternative to fiat currency.
<span style="color: #cd0000;">-350.</span>
<span style="color: #00cd00;">+376.</span>
Throughout the Offering, Defendants did not restrict sales of XRP to purchasers
who would actually “use†XRP as a medium to execute cross-border transactions. Defendants
offered, sold, and distributed XRP to investors worldwide, in any quantities and at various prices.
<span style="color: #cd0000;">-351.</span>
<span style="color: #00cd00;">+377.</span>
Throughout the Offering, Defendants offered, sold, and distributed XRP in amounts
that far exceeded any potential “use†of XRP as a medium to transfer value.
<span style="color: #cd0000;">-352.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+65</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 66 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+378.</span>
Defendants did not restrict the XRP they sold to money transmitters for use in ODL
<span style="color: #00cdcd;">@@ -2983,66 +3243,61 @@</span>
XRP Are Not “Currency†Under the Federal Securities Laws
<span style="color: #cd0000;">-353.</span>
<span style="color: #00cd00;">+379.</span>
In May 2015, Ripple and XRP II agreed (i) to settle charges brought by the United
States Department of Justice and FinCEN for failing to register as a “Money Services Businessâ€
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-59</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 60 of 71</span>
<span style="color: #cd0000;">-</span>
under the Bank Secrecy Act and (ii) to comply with other regulatory requirements with respect to
Ripple’s XRP sales, which the settlement called “virtual currency.â€
<span style="color: #cd0000;">-354.</span>
<span style="color: #00cd00;">+380.</span>
Consequently, Ripple has at times suggested that XRP are not securities, but instead
exempt from the Securities Act altogether as “currencies.â€
<span style="color: #cd0000;">-355.</span>
<span style="color: #00cd00;">+381.</span>
<span style="color: #cd0000;">-XRP is not “currency†under the federal securities laws.5</span>
<span style="color: #00cd00;">+XRP is not “currency†under the federal securities laws. 5</span>
<span style="color: #cd0000;">-356.</span>
<span style="color: #00cd00;">+382.</span>
XRP has not been designated as legal tender in any jurisdiction. XRP is not issued
by, nor is backed by the full faith and credit of, any country, national government, central bank, or
other central monetary authority. A “native currency†that operates, for example, on Ripple’s
<span style="color: #cd0000;">-decentralized network of blockchain technology is a specialized instrument for a particular computer</span>
<span style="color: #cd0000;">-network, not legal tender. Similarly, using XRP as a “bridge†between two real, fiat currencies does</span>
<span style="color: #cd0000;">-not bestow legal tender status on XRP.</span>
<span style="color: #cd0000;">-357.</span>
<span style="color: #00cd00;">+decentralized network of blockchain technology, is a specialized instrument for a particular</span>
<span style="color: #00cd00;">+computer network, not legal tender. Similarly, using XRP as a “bridge†between two real, fiat</span>
<span style="color: #00cd00;">+currencies does not bestow legal tender status on XRP.</span>
<span style="color: #00cd00;">+383.</span>
Moreover, Ripple has never offered or sold XRP as “currency,†as that term is used
in the federal securities laws. Throughout the Offering, Ripple never restricted offers or sales of
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+FinCEN has repeatedly reiterated its view that “virtual currency†that may be converted for</span>
<span style="color: #00cd00;">+traditional fiat currencies may still be subject to the federal securities laws “regardless of other</span>
<span style="color: #00cd00;">+intended purposes†for the convertible virtual currency. See, e.g., FinCEN Guidance, Application of</span>
<span style="color: #00cd00;">+FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, FIN2019-G001 (May 9, 2019) available at https://www.fincen.gov/sites/default/files/201905/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf.</span>
<span style="color: #00cd00;">+5</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+66</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 67 of 79</span>
<span style="color: #00cd00;">+</span>
XRP solely to purchasers who had a need for alternatives to traditional, fiat currencies, nor did
Ripple promote XRP as an instrument for consumers to purchase goods or services.
<span style="color: #cd0000;">-358.</span>
<span style="color: #00cd00;">+384.</span>
Instead, Ripple and its executives repeatedly publicly disclaimed that XRP was
“currency†and tried to dissuade investors from thinking about XRP as “currency.â€
<span style="color: #cd0000;">-359.</span>
<span style="color: #00cd00;">+385.</span>
For example, in June 2016, Cryptographer-1 explained in a public XRP Chat post:
“We do not plan to encourage use of XRP as an alternative to Bitcoin or as a direct payment
method at this time.â€
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-5</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-FinCEN has repeatedly reiterated its view that “virtual currency†that may be converted for</span>
<span style="color: #cd0000;">-traditional fiat currencies may still be subject to the federal securities laws “regardless of other</span>
<span style="color: #cd0000;">-intended purposes†for the convertible virtual currency. See, e.g., FinCEN Guidance, Application of</span>
<span style="color: #cd0000;">-FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, FIN2019-G001 (May 9, 2019) available at https://www.fincen.gov/sites/default/files/201905/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf.</span>
<span style="color: #cd0000;">-60</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 61 of 71</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-360.</span>
<span style="color: #00cd00;">+386.</span>
Two years later, in a press conference on March 14, 2018, Garlinghouse stated:
<span style="color: #00cdcd;">@@ -3052,7 +3307,7 @@</span>
something you can use to transact efficiently and broadly. Very few people,
even in the crypto community have used the, you know, Bitcoin or XRP to
buy something.
<span style="color: #cd0000;">-361.</span>
<span style="color: #00cd00;">+387.</span>
Similarly, in Garlinghouse’s Economic Club Speech in October 2019, a moderator
<span style="color: #00cdcd;">@@ -3061,11 +3316,11 @@</span>
use case today. . . . [W]hen people talk about using crypto for consumer use case I go to the ‘well
what problem are we trying to solve?’ . . . [I]n first world countries like the United States . . . I don’t
see the consumer use for crypto any time soon,†or even for “95% of global GDP.â€
<span style="color: #cd0000;">-362.</span>
<span style="color: #00cd00;">+388.</span>
Ripple’s own current internal policies treat XRP as securities—not currency.
<span style="color: #cd0000;">-363.</span>
<span style="color: #00cd00;">+389.</span>
Since at least 2015, Ripple’s internal “Code of Conduct†has directed Ripple
<span style="color: #00cdcd;">@@ -3073,41 +3328,42 @@</span>
or the Ripple protocol that has not been publicly announced, and which might reasonably affect the
decision to buy or sell XRPâ€â€”effectively, a prohibition against insider trading, applicable to
securities under the federal securities laws.
<span style="color: #cd0000;">-364.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+67</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 68 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+390.</span>
Similarly, since at least July 2019, Ripple has banned certain members of its
“leadership team†from entering into a “trading plan†for XRP “on the basis of information a
reasonable person would consider important in making his or her decision to purchase, hold or sell
XRPâ€â€”another implicit reference to rules governing insider trading.
<span style="color: #cd0000;">-365.</span>
<span style="color: #00cd00;">+391.</span>
Even if some country were to recognize XRP as fiat “currency†at some point in the
future, that would result from Defendants’ significant entrepreneurial and managerial efforts to date
(and likely in the future), on which public investors expecting profit relied when making an
investment of money into Defendants’ common enterprise.
<span style="color: #cd0000;">-61</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 62 of 71</span>
<span style="color: #cd0000;">-</span>
VI.
Defendants Failed to Register the Offering with the SEC
<span style="color: #cd0000;">-366.</span>
<span style="color: #00cd00;">+392.</span>
Defendants used interstate commerce for the Offering by, among other things,
promoting investments in XRP in emails, interviews disseminated to the public through television
and the Internet, and publicly available social media applications; and by effecting transfers of XRP
and of the Offering proceeds through global digital asset trading platforms.
<span style="color: #cd0000;">-367.</span>
<span style="color: #00cd00;">+393.</span>
Defendants have never filed a registration statement with the SEC with respect to
any XRP they have offered or sold or intend to offer or sell, and no registration statement has ever
been in effect with respect to any offers or sales of XRP.
<span style="color: #cd0000;">-368.</span>
<span style="color: #00cd00;">+394.</span>
Ripple’s public disclosures contained selective or no information about Ripple’s
<span style="color: #00cdcd;">@@ -3118,6 +3374,11 @@</span>
operations, financial condition, or other factors relevant in considering whether to invest in XRP.
XRP investors have also been deprived of information about how Ripple’s executives are being
compensated as a result of the Offering or about Ripple’s use of funds derived from the sale of
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+68</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 69 of 79</span>
<span style="color: #00cd00;">+</span>
XRP. Nor have investors received complete information about any steps Ripple is taking to
incentivize financial institutions to adopt XRP for use in a payment system, including the extent and
nature of incentive payments made to businesses Ripple touts as market-driven “users†of its
<span style="color: #00cdcd;">@@ -3125,11 +3386,6 @@</span>
XRP purchasers and the market lack information that issuers provide under the Securities Act and
the Exchange Act when they solicit public investment and foster a secondary market when their
securities are publicly traded.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-62</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 63 of 71</span>
<span style="color: #cd0000;">-</span>
VII.
Larsen and Garlinghouse Knowingly or Recklessly Provided Substantial Assistance
<span style="color: #00cdcd;">@@ -3139,16 +3395,16 @@</span>
Larsen Assumed the Risk that XRP Could Be a Security and Pushed the
Offering Forward
<span style="color: #cd0000;">-369.</span>
<span style="color: #00cd00;">+395.</span>
Ripple and Larsen knew that XRP may be a security from the onset of the Offering
<span style="color: #cd0000;">-and simply ignored legal requirements regarding registration and required periodic and current</span>
<span style="color: #cd0000;">-public disclosures. As described above in Section I.B, above, the Legal Memos Ripple</span>
<span style="color: #cd0000;">-commissioned in February and October 2012 warned that there was some risk that XRP would be</span>
<span style="color: #cd0000;">-considered an “investment contract†(and thus a security under the federal securities laws)</span>
<span style="color: #cd0000;">-depending on various factors.</span>
<span style="color: #cd0000;">-370.</span>
<span style="color: #00cd00;">+but disregarded legal requirements regarding registration and required periodic and current public</span>
<span style="color: #00cd00;">+disclosures. As described above in Section I.B, above, the Legal Memos Ripple commissioned in</span>
<span style="color: #00cd00;">+February and October 2012 warned that there was some risk that XRP would be considered an</span>
<span style="color: #00cd00;">+“investment contract†(and thus a security under the federal securities laws) depending on various</span>
<span style="color: #00cd00;">+factors.</span>
<span style="color: #00cd00;">+396.</span>
Although both the February 2012 and the October 2012 Legal Memos warned that,
<span style="color: #00cdcd;">@@ -3158,13 +3414,18 @@</span>
stewardship, Ripple promoted XRP as a speculative investment when either no use case existed or,
with the eventual development of the ODL product, only a small fraction of XRP arguably was
being “used†for a few moments for non-investment purposes before being sold to investors.
<span style="color: #cd0000;">-371.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+69</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 70 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+397.</span>
Larsen understood that investors were purchasing XRP as an investment—precisely
the situation that both the February 2012 and the October 2012 Legal Memos had warned could
lead to a determination that XRP was a security.
<span style="color: #cd0000;">-372.</span>
<span style="color: #00cd00;">+398.</span>
For example, on February 6, 2017, “an early investor in XRP†wrote Larsen to
<span style="color: #00cdcd;">@@ -3172,22 +3433,42 @@</span>
connecting banks serves . . . emerging trends†such that “the more banks that connect thru Ripple
. . . the more demand we should see for XRP as an asset to reduce liquidity costs.†Acknowledging
the investors’ “concerns around the current state of volume flows†for XRP, Larsen concluded:
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-63</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 64 of 71</span>
<span style="color: #cd0000;">-</span>
“Frankly, the entire industry is really in the earliest stages of developments. Most volume in the
space is speculation in advance of enterprise and eventually consumer flows.â€
<span style="color: #cd0000;">-373.</span>
<span style="color: #00cd00;">+399.</span>
Larsen also received additional warnings that XRP could be subject to the federal
<span style="color: #cd0000;">-securities laws. On January 5, 2015, the head of an entity establishing a fund to invest in XRP</span>
<span style="color: #00cd00;">+securities laws, including because XRP was not a “currency†and because, even if it was, it could still</span>
<span style="color: #00cd00;">+be a security under the federal securities laws.</span>
<span style="color: #00cd00;">+400.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+On November 11, 2013, Ripple’s accountants sent Larsen a draft memo regarding</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+certain United States taxation considerations for Ripple and XRP. The memo explained that XRP</span>
<span style="color: #00cd00;">+was likely not currency under federal income tax laws, principally because XRP “is not considered</span>
<span style="color: #00cd00;">+legal tender in the U.S.†The memo also explained to Larsen that “‘virtual’ currency†like XRP was</span>
<span style="color: #00cd00;">+not traditional currency under FinCEN guidance issued on March 18, 2013 for the same reason—</span>
<span style="color: #00cd00;">+namely, that XRP was not legal tender in any jurisdiction.</span>
<span style="color: #00cd00;">+401.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+On January 5, 2015, the head of the entity looking to establish XRP Fund A</span>
<span style="color: #00cd00;">+</span>
forwarded to Larsen an email from the fund’s attorney, who worked at a prominent global law firm.
The attorney’s email advised that, while the attorney did not know “whether a virtual currency is
itself a security[,] . . . one certainly can create a security by packaging virtual currency.â€
<span style="color: #cd0000;">-374.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+70</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 71 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+402.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+On March 9, 2016, while Larsen was CEO, Ripple’s attorneys wrote to the NYDFS</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+stating that “XRP II and Ripple consider XRP a digital asset, not a currency†and that “XRP is not</span>
<span style="color: #00cd00;">+intended to be used as a currency.â€</span>
<span style="color: #00cd00;">+403.</span>
Including as described above in this Complaint, Larsen provided substantial
<span style="color: #00cdcd;">@@ -3200,130 +3481,200 @@</span>
Garlinghouse Was Warned and Understood That XRP Had “Securities-Typeâ€
Characteristics
<span style="color: #cd0000;">-375.</span>
<span style="color: #00cd00;">+404.</span>
<span style="color: #cd0000;">-By at least June 2017, Garlinghouse knew or recklessly disregarded that Ripple’s</span>
<span style="color: #00cd00;">+By at least June 2015, Garlinghouse knew or recklessly disregarded that Ripple’s</span>
offers and sales of XRP were part of the offer and sale of an investment contract and thus a security.
<span style="color: #cd0000;">-376.</span>
<span style="color: #00cd00;">+405.</span>
<span style="color: #cd0000;">-For example, in an email conversation between Garlinghouse and Ripple Agent-1 on</span>
<span style="color: #00cd00;">+From the outset of his employment at Ripple, Garlinghouse was involved in</span>
<span style="color: #cd0000;">-June 2015, Ripple Agent-1 expressed a desire to maintain a Ripple trading platform to specifically</span>
<span style="color: #cd0000;">-and uniquely target “non-consumer[s].†In response, Garlinghouse told Ripple Agent-1 it was “not</span>
<span style="color: #cd0000;">-clear to [him] . . . how one would reasonably discern (through an online process) between a</span>
<span style="color: #cd0000;">-speculator and a consumer.†In essence, Garlinghouse conveyed that Ripple was then already</span>
<span style="color: #cd0000;">-unable to distinguish between sales it made to speculators and to “consumers.â€</span>
<span style="color: #cd0000;">-377.</span>
<span style="color: #00cd00;">+decisions regarding offers and sales of XRP and understood, at all relevant times, that sales of XRP</span>
<span style="color: #00cd00;">+drove Ripple’s revenues and that, as reflected in his numerous public statements, the digital asset</span>
<span style="color: #00cd00;">+space entails risks relating to the application of the federal securities laws.</span>
<span style="color: #00cd00;">+406.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Moreover, in an email conversation between Garlinghouse and Ripple Agent-1 on</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+June 2015, Ripple Agent-1 conveyed to Garlinghouse Larsen’s desire to maintain a Ripple trading</span>
<span style="color: #00cd00;">+platform to specifically and uniquely target “non-consumer[s].†In response, Garlinghouse told</span>
<span style="color: #00cd00;">+Ripple Agent-1 it was “not clear to [him] . . . how one would reasonably discern (through an online</span>
<span style="color: #00cd00;">+process) between a speculator and a consumer.†In essence, Garlinghouse conveyed that Ripple was</span>
<span style="color: #00cd00;">+then already unable to distinguish between sales it made to speculators and to “consumers.â€</span>
<span style="color: #00cd00;">+407.</span>
On March 11, 2017, Ripple’s then-chief compliance officer explained to
Garlinghouse in an email that “XRP certainly has some ‘securities-type’ characteristics and we do
need to hone our playbook/messaging.â€
<span style="color: #cd0000;">-64</span>
<span style="color: #00cd00;">+71</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 65 of 71</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 72 of 79</span>
<span style="color: #cd0000;">-378.</span>
<span style="color: #00cd00;">+408.</span>
On April 16, 2017, Garlinghouse was similarly advised by e-mail that the same chief
compliance officer “want[ed] to make sure the verbiage [in employee offer letters regarding XRP
notional value] doesn’t put us at risk of XRP sounding like a security.â€
<span style="color: #cd0000;">-379.</span>
<span style="color: #00cd00;">+409.</span>
Garlinghouse, demonstrating a keen interest in the regulatory status of digital assets,
also commented on Ripple’s website immediately after the SEC issued the DAO Report in July 2017:
“I say, if it looks like a duck and quacks like a duck then let’s regulate it like a duck.â€
<span style="color: #cd0000;">-380.</span>
<span style="color: #00cd00;">+410.</span>
Garlinghouse nevertheless continued to make XRP sound like a security, including in
interviews later in 2017 boasting about being “very long†XRP and in comments in connection with
the XRP Escrow about how Ripple’s efforts were meant to stabilize XRP’s price.
<span style="color: #cd0000;">-381.</span>
<span style="color: #00cd00;">+411.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+On December 11, 2017, Ripple’s public relations firm emailed Garlinghouse to</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+notify him that they wanted to “call . . . out†a recent statement by the then-SEC Chairman that</span>
<span style="color: #00cd00;">+“[m]erely calling a token a ‘utility’ token or structuring it to provide some utility does not prevent the</span>
<span style="color: #00cd00;">+token†from being a security, given that it “had been a concern to have XRP considered a security.â€</span>
<span style="color: #00cd00;">+412.</span>
The following year, in January 2018, Garlinghouse again demonstrated he
understood at least certain factors that could determine whether XRP could be deemed a security.
Only weeks after he touted being “very long†XRP in interviews, he commented, on an internal
Ripple draft document, that XRP should not be promoted as an investment.
<span style="color: #cd0000;">-382.</span>
<span style="color: #00cd00;">+413.</span>
The following month, in a Yahoo! Finance interview he gave in February 2018,
Garlinghouse acknowledged his understanding that “if there is not a real use case then it’s really a
securities offering. And if it’s a securities offering there’s not regulatory uncertainty. It should be
regulated as a securities offering.†At that time, Garlinghouse knew or recklessly disregarded that
<span style="color: #cd0000;">-none of Ripple’s sales of XRP up to that point had been with respect to any “use†of XRP.</span>
<span style="color: #cd0000;">-383.</span>
<span style="color: #00cd00;">+none of Ripple’s sales of XRP up to that point had been with respect to any “use†of XRP. In this</span>
<span style="color: #00cd00;">+interview, Garlinghouse also characterized “people in the crypto space talking about ‘regulatory</span>
<span style="color: #cd0000;">-Garlinghouse also admitted in a non-public setting that he is cognizant of the risk</span>
<span style="color: #00cd00;">+72</span>
<span style="color: #cd0000;">-that XRP could be “classified as a security.†Specifically, as reflected in an Equity Investor A</span>
<span style="color: #cd0000;">-employee email, dated July 23, 2018, Garlinghouse (accompanied by Larsen) met with Equity</span>
<span style="color: #cd0000;">-Investor A, “spoke for a while on the outstanding issue of whether XRP gets classified as a</span>
<span style="color: #cd0000;">-security,†and noted that, while he was “optimistic that†it would not, he could “[]not guarantee</span>
<span style="color: #cd0000;">-that.â€</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 73 of 79</span>
<span style="color: #cd0000;">-65</span>
<span style="color: #00cd00;">+uncertainty’†by saying “more often than not that means ‘I disagree with the regulatory certainty so</span>
<span style="color: #00cd00;">+I’m going to call it regulatory uncertainty.’â€</span>
<span style="color: #00cd00;">+414.</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 66 of 71</span>
<span style="color: #00cd00;">+On January 11, 2018, Garlinghouse signed Ripple’s application to seek Platform A to</span>
<span style="color: #cd0000;">-384.</span>
<span style="color: #00cd00;">+make XRP available for trading. The application represented that “[w]e understand that whether or</span>
<span style="color: #00cd00;">+not a digital asset may be considered a security is an important consideration for many in the digital</span>
<span style="color: #00cd00;">+asset ecosystem†and stated that Ripple had “received a legal memorandum from a reputable law</span>
<span style="color: #00cd00;">+firm†regarding the status of XRP under the federal securities laws.</span>
<span style="color: #00cd00;">+415.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Platform A was one of at least four platforms incorporated in the United States that</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+asked Ripple for a legal opinion as to the status of XRP under the federal securities laws. At least</span>
<span style="color: #00cd00;">+one such platform declined to make XRP available for trading due to Ripple’s failure to provide</span>
<span style="color: #00cd00;">+such an opinion, as Ripple Agent-2 informed Garlinghouse and Larsen in a July 14, 2018 email.</span>
<span style="color: #00cd00;">+416.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+As alleged in Section II.E.5 and herein, Garlinghouse actively participated in Ripple’s</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+efforts to make XRP available on these platforms from the outset of his tenure at Ripple and was</span>
<span style="color: #00cd00;">+therefore aware that the status of XRP under the federal securities laws was important to these</span>
<span style="color: #00cd00;">+United States-based platforms. More specifically, Garlinghouse’s participation in these processes</span>
<span style="color: #00cd00;">+made him aware that, if there was a market or independent legal consensus that XRP is a security</span>
<span style="color: #00cd00;">+under the federal securities laws, United States-based platforms would question whether to allow</span>
<span style="color: #00cd00;">+XRP to be traded on their platforms.</span>
<span style="color: #00cd00;">+417.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+As also alleged in Section II.E.5, Garlinghouse understood that Ripple’s ability to sell</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+XRP on these platforms was critical to its ability to capitalize its operations. Garlinghouse</span>
<span style="color: #00cd00;">+understood that Ripple is not profitable and cannot operate without continued sales of XRP because</span>
<span style="color: #00cd00;">+such sales are Ripple’s “revenue driver,†as he has publicly stated.</span>
<span style="color: #00cd00;">+418.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+For example, in an April 10, 2018 email, a Ripple employee told Garlinghouse that</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Platform A was “hesitant to list XRP†precisely because of the “regulatory uncertainty†that XRP</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+73</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 74 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+could be deemed a security. The employee further informed Garlinghouse that, for that reason,</span>
<span style="color: #00cd00;">+Platform A had declined Ripple’s request that Platform A tell the press that regulatory uncertainty</span>
<span style="color: #00cd00;">+had not factored into Platform A’s decision not to make XRP available.</span>
<span style="color: #00cd00;">+419.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+In his April 11, 2018 response, Garlinghouse demonstrated his understanding that</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+“regulatory uncertainty†about the status of XRP could hurt Ripple’s XRP trading strategy (including</span>
<span style="color: #00cd00;">+making it available on digital asset trading platforms for speculators) and sought to dispel such</span>
<span style="color: #00cd00;">+concerns. Garlinghouse stated that, while he was “not exactly ‘ok’ with†Platform A’s proposed</span>
<span style="color: #00cd00;">+response to the press, he thought it “achieve[d] our primary goal of dispelling the BS that</span>
<span style="color: #00cd00;">+Bloomberg put out there that [Platforms A and C] are hesitant to list XRP because of concerns</span>
<span style="color: #00cd00;">+about it being a security.â€</span>
<span style="color: #00cd00;">+420.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Garlinghouse again admitted in a non-public setting that he is cognizant of the risk</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+that XRP could be “classified as a security†to Equity Investor A. Specifically, as reflected in an</span>
<span style="color: #00cd00;">+Equity Investor A employee email, dated July 23, 2018, Garlinghouse (accompanied by Larsen) met</span>
<span style="color: #00cd00;">+with Equity Investor A, “spoke for a while on the outstanding issue of whether XRP gets classified</span>
<span style="color: #00cd00;">+as a security,†and noted that, while he was “optimistic that†it would not, he could “[]not guarantee</span>
<span style="color: #00cd00;">+that.â€</span>
<span style="color: #00cd00;">+421.</span>
In a speech he gave in Manhattan in October 2019, Garlinghouse further
acknowledged that people are “speculating on digital assets†and that “99.9% of all crypto trading
today is just speculation,†a factor he knew could lead to a determination that XRP was a security.
<span style="color: #cd0000;">-385.</span>
<span style="color: #00cd00;">+422.</span>
Throughout the course of this conduct, Garlinghouse had an incentive to make
<span style="color: #cd0000;">-efforts to increase XRP’s trading price and volume. Pursuant to an options grant of up to 500</span>
<span style="color: #cd0000;">-million XRP dated December 13, 2016, Ripple would pay Garlinghouse in XRP, only if the volume</span>
<span style="color: #cd0000;">-weighted average price of XRP was “at least $0.02/XRP†for four consecutive weeks and the weekly</span>
<span style="color: #cd0000;">-XRP trading volume was at least 1.4 billion for at least four consecutive weeks.</span>
<span style="color: #cd0000;">-386.</span>
<span style="color: #00cd00;">+efforts to increase XRP’s trading price and volume, including to obtain more favorable prices for the</span>
<span style="color: #00cd00;">+sale of his own XRP and Ripple’s. Moreover, pursuant to an options grant of up to 500 million</span>
<span style="color: #00cd00;">+XRP dated December 13, 2016, Ripple would pay Garlinghouse in XRP, only if the volume</span>
<span style="color: #cd0000;">-Garlinghouse understands that Ripple is not profitable and cannot operate without</span>
<span style="color: #00cd00;">+74</span>
<span style="color: #cd0000;">-continued sales of XRP, as he has publicly stated.</span>
<span style="color: #cd0000;">-387.</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 75 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+weighted average price of XRP was “at least $0.02/XRP†for four consecutive weeks and the weekly</span>
<span style="color: #00cd00;">+XRP trading volume was at least 1.4 billion for at least four consecutive weeks.</span>
<span style="color: #00cd00;">+423.</span>
From April 2015 to the present, Garlinghouse provided substantial assistance to
Ripple in conducting its Offering.
<span style="color: #cd0000;">-388.</span>
<span style="color: #00cd00;">+424.</span>
In addition to making the various promotional statements and efforts described
above in this Complaint, Garlinghouse, as both COO and later CEO, participated in weekly XRP
<span style="color: #cd0000;">-sales meetings where he exercised final decision-making authority over the timing and amount of</span>
<span style="color: #cd0000;">-Ripple’s XRP sales, including whether to adjust Ripple’s XRP sales based on factors such as market</span>
<span style="color: #cd0000;">-conditions, volume, price, or the capital needs of the company.</span>
<span style="color: #cd0000;">-389.</span>
<span style="color: #00cd00;">+sales meetings where he exercised decision-making authority (including final decision-making</span>
<span style="color: #00cd00;">+authority as CEO) over the timing and amount of Ripple’s XRP sales. Garlinghouse’s decisions</span>
<span style="color: #00cd00;">+included whether to adjust Ripple’s XRP sales based on factors such as market conditions, volume,</span>
<span style="color: #00cd00;">+price, or the capital needs of the company.</span>
<span style="color: #00cd00;">+425.</span>
Garlinghouse similarly exercised final decision-making authority over how much
XRP Ripple would offer and sell on a daily basis.
<span style="color: #cd0000;">-390.</span>
<span style="color: #00cd00;">+426.</span>
<span style="color: #cd0000;">-Garlinghouse also made the decision to establish the XRP Escrow and approved</span>
<span style="color: #00cd00;">+Garlinghouse also made the decision to establish the XRP Escrow and, as alleged,</span>
<span style="color: #cd0000;">-paying XRP as incentives to digital asset trading platforms for “listing†XRP or achieving certain</span>
<span style="color: #cd0000;">-trading volume benchmarks.</span>
<span style="color: #cd0000;">-391.</span>
<span style="color: #00cd00;">+approved paying XRP as incentives to digital asset trading platforms for “listing†XRP or achieving</span>
<span style="color: #00cd00;">+certain trading volume benchmarks.</span>
<span style="color: #00cd00;">+427.</span>
Garlinghouse acted at least recklessly while engaging in this conduct.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-66</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 67 of 71</span>
<span style="color: #cd0000;">-</span>
TOLLING AGREEMENTS
<span style="color: #cd0000;">-392.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+428.</span>
Ripple and the SEC entered into tolling agreements suspending the running of any
<span style="color: #00cdcd;">@@ -3331,20 +3682,25 @@</span>
September 7, 2019, from September 8, 2019 through December 8, 2019, from December 9, 2019
through June 8, 2020, from June 9, 2020 through December 9, 2020, and from December 10, 2020
through December 24, 2020.
<span style="color: #cd0000;">-393.</span>
<span style="color: #00cd00;">+429.</span>
Larsen and the SEC entered into a tolling agreement suspending the running of any
applicable statute of limitations from September 1, 2020, through December 31, 2020.
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+75</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 76 of 79</span>
<span style="color: #00cd00;">+</span>
FIRST CLAIM FOR RELIEF
Violations of Sections 5(a) and 5(c) of the Securities Act
(All Defendants)
<span style="color: #cd0000;">-394.</span>
<span style="color: #00cd00;">+430.</span>
The Commission realleges and incorporates by reference here the allegations in
<span style="color: #cd0000;">-paragraphs 1 through 393.</span>
<span style="color: #cd0000;">-395.</span>
<span style="color: #00cd00;">+paragraphs 1 through 429.</span>
<span style="color: #00cd00;">+431.</span>
By virtue of the foregoing, (a) without a registration statement in effect as to that
<span style="color: #00cdcd;">@@ -3354,7 +3710,7 @@</span>
of transportation or communication in interstate commerce or of the mails to offer to sell through
the use or medium of a prospectus or otherwise, securities as to which no registration statement had
been filed.
<span style="color: #cd0000;">-396.</span>
<span style="color: #00cd00;">+432.</span>
Ripple violated Sections 5(a) and 5(c) of the Securities Act by conducting the
<span style="color: #00cdcd;">@@ -3362,14 +3718,9 @@</span>
directly and indirectly making use of the means and instruments of transportation or
communications in interstate commerce or of the mails to sell 14.6 billion XRP without a
registration statement in effect as to XRP, and by making use of the means and instruments of
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-67</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 68 of 71</span>
<span style="color: #cd0000;">-</span>
transportation or communication in interstate commerce or of the mails to offer to sell XRP, which
were offered and sold as securities, as to which no registration statement had been filed.
<span style="color: #cd0000;">-397.</span>
<span style="color: #00cd00;">+433.</span>
Larsen violated Sections 5(a) and 5(c) of the Securities Act by, from 2013 through
<span style="color: #00cdcd;">@@ -3378,17 +3729,22 @@</span>
statement in effect as to XRP, and by making use of the means and instruments of transportation or
communication in interstate commerce or of the mails to offer to sell XRP, which were offered and
sold as securities, as to which no registration statement had been filed.
<span style="color: #cd0000;">-398.</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+76</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 77 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+434.</span>
Garlinghouse violated Sections 5(a) and 5(c) of the Securities Act by, from 2016
through the present, directly and indirectly making use of the means and instruments of
<span style="color: #cd0000;">-transportation or communications in interstate commerce or of the mails to sell 321 million XRP</span>
<span style="color: #00cd00;">+transportation or communications in interstate commerce or of the mails to sell 357 million XRP</span>
without a registration statement in effect as to XRP, and by making use of the means and
instruments of transportation or communication in interstate commerce or of the mails to offer to
sell XRP, which were offered and sold as securities, as to which no registration statement had been
filed.
<span style="color: #cd0000;">-399.</span>
<span style="color: #00cd00;">+435.</span>
By reason of the conduct described above, Defendants, directly or indirectly,
<span style="color: #00cdcd;">@@ -3397,36 +3753,36 @@</span>
SECOND CLAIM FOR RELIEF
Aiding and Abetting Violations of Securities Act Sections 5(a) and 5(c)
(Larsen and Garlinghouse)
<span style="color: #cd0000;">-400.</span>
<span style="color: #00cd00;">+436.</span>
The Commission realleges and incorporates by reference here the allegations in
<span style="color: #cd0000;">-paragraphs 1 through 393.</span>
<span style="color: #cd0000;">-401.</span>
<span style="color: #00cd00;">+paragraphs 1 through 429.</span>
<span style="color: #00cd00;">+437.</span>
By engaging in the acts and conduct described in this Complaint, Defendants Larsen
and Garlinghouse, directly or indirectly, knowingly or recklessly provided substantial assistance to
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-68</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 69 of 71</span>
<span style="color: #cd0000;">-</span>
Ripple, who, from 2013 through the present, directly and indirectly have made and are making use
of the means and instruments of transportation or communications in interstate commerce or of the
mails to sell 14.6 billion XRP without a registration statement in effect as to XRP, and by making
use of the means and instruments of transportation or communication in interstate commerce or of
the mails to offer to sell XRP, which were offered and sold as securities, as to which no registration
statement had been filed.
<span style="color: #cd0000;">-402.</span>
<span style="color: #00cd00;">+438.</span>
Larsen knowingly or recklessly provided substantial assistance to Ripple’s violations
<span style="color: #cd0000;">-of Sections 5(a) and 5(c) of the Securities Act including by: (i) from 2013 to 2016, deciding when and</span>
<span style="color: #cd0000;">-how much XRP Ripple would sell, establishing the XRP Escrow, making promotional statements</span>
<span style="color: #cd0000;">-with respect to XRP, and spearheading Ripple’s efforts to attempt to increase demand for XRP; and</span>
<span style="color: #cd0000;">-(ii) from 2015 to the present, making his own sales of XRP.</span>
<span style="color: #cd0000;">-403.</span>
<span style="color: #00cd00;">+of Sections 5(a) and 5(c) of the Securities Act including by, from 2013 to the present, deciding when</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+77</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 78 of 79</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+and how much XRP Ripple would sell, establishing the XRP Escrow, making promotional</span>
<span style="color: #00cd00;">+statements with respect to XRP, spearheading Ripple’s efforts to attempt to increase demand for</span>
<span style="color: #00cd00;">+XRP, and making his own sales of XRP.</span>
<span style="color: #00cd00;">+439.</span>
Garlinghouse knowingly or recklessly provided substantial assistance to Ripple’s
<span style="color: #00cdcd;">@@ -3434,7 +3790,7 @@</span>
deciding when and how much XRP Ripple would sell, establishing the XRP Escrow, making
promotional statements with respect to XRP, spearheading Ripple’s efforts to attempt to increase
demand for XRP, and making his own sales of XRP.
<span style="color: #cd0000;">-404.</span>
<span style="color: #00cd00;">+440.</span>
By reason of the foregoing, Larsen and Garlinghouse are liable pursuant to Section
<span style="color: #00cdcd;">@@ -3444,21 +3800,22 @@</span>
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-69</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 70 of 71</span>
<span style="color: #cd0000;">-</span>
I.
Permanently enjoining Defendants, and each of their respective agents, servants, employees,
attorneys and other persons in active concert or participation with any of them, from violating,
directly or indirectly, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. § 77e(a), 77e(c)],
including by delivering XRP to any persons or taking any other steps to effect any unregistered offer
or sale of XRP;
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+78</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+Case 1:20-cv-10832-AT Document 46 Filed 02/18/21 Page 79 of 79</span>
<span style="color: #00cd00;">+</span>
II.
Ordering Defendants to disgorge all ill-gotten gains obtained within the statute of
limitations, with prejudgment interest thereon, pursuant to Section 21(d)(5) of the Exchange Act
<span style="color: #cd0000;">-[15 U.S.C. § 78u(d)(5)];</span>
<span style="color: #00cd00;">+[15 U.S.C. § 78u(d)(5)] and Sections 6501(a) and (b) of the National Defense Authorization Act for</span>
<span style="color: #00cd00;">+Fiscal Year 2021, Pub. L. 116-283, 134 Stat. 3388 (Jan. 1, 2021);</span>
III.
Prohibiting Defendants from participating in any offering of digital asset securities pursuant
to Section 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)];
<span style="color: #00cdcd;">@@ -3468,35 +3825,30 @@</span>
V.
Granting any other and further relief this Court may deem just and proper for the benefit of
investors.
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-70</span>
<span style="color: #cd0000;">-</span>
<span style="color: #cd0000;">-Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 71 of 71</span>
<span style="color: #cd0000;">-</span>
JURY DEMAND
The Commission demands a trial by jury.
Dated: New York, New York
<span style="color: #cd0000;">-December 22, 2020</span>
<span style="color: #00cd00;">+February 18, 2021</span>
<span style="color: #00cd00;">+</span>
<span style="color: #00cd00;">+/s/ Richard Best</span>
________________________________
<span style="color: #cd0000;">-Richard R. Best</span>
<span style="color: #cd0000;">-Preethi Krishnamurthy</span>
<span style="color: #00cd00;">+Richard Best</span>
Jorge G. Tenreiro
Dugan Bliss
Attorneys for Plaintiff
SECURITIES AND EXCHANGE
COMMISSION
<span style="color: #cd0000;">-New York Regional Office</span>
<span style="color: #cd0000;">-Brookfield Place</span>
<span style="color: #00cd00;">+New York Regional Office - Brookfield Place</span>
200 Vesey Street, Suite 400
New York, New York 10281-1022
(212) 336-9145 (Tenreiro)
Email: TenreiroJ@sec.gov
<span style="color: #00cd00;">+</span>
Of Counsel
<span style="color: #cd0000;">-Kristina Littman</span>
<span style="color: #cd0000;">-John O. Enright</span>
<span style="color: #00cd00;">+Preethi Krishnamurthy</span>
Daphna A. Waxman
<span style="color: #cd0000;">-Jon Daniels</span>
<span style="color: #00cd00;">+Jon A. Daniels</span>
<span style="color: #cd0000;">-71</span>
<span style="color: #00cd00;">+79</span>
\ No newline at end of file</pre>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-50358999290942552712020-02-10T21:27:00.002-08:002020-09-17T22:08:27.002-07:00Has Tiffany Hayden been spreading FUD lately?After a discussion with her, my conclusion is that there is a chance that she genuinely believes that she is not spreading FUD. But it's also not hard to see why many people see it that way.<br />
<br />
The discussion happened here:<br />
<blockquote class="twitter-tweet">
<div dir="ltr" lang="en">
Something has happened to <a href="https://twitter.com/haydentiff?ref_src=twsrc%5Etfw">@haydentiff</a>. This is for sure. I don't know what it is though. If this is not fear-mongering, I don't know what fear-mongering is. First, why would Ripple abandon XRP. Second, no validator would do that because it won't work. <a href="https://t.co/g6CDp1Gkiq">https://t.co/g6CDp1Gkiq</a></div>
— r0bertz (@r0bertz) <a href="https://twitter.com/r0bertz/status/1226954736047247360?ref_src=twsrc%5Etfw">February 10, 2020</a></blockquote>
<script async="" charset="utf-8" src="https://platform.twitter.com/widgets.js"></script>
The initial tweet reflected my thought at the time I was posting the tweet. I am not going to change it.<br />
<br />
So now let me summary how it went.<br />
<br />
In the so called "FUD" tweet, Tiffany described a scenario "If Ripple abandoned XRP, the validators would vote to increase reserve to 25K XRP to freeze almost everyone else so we could cash out first".<br />
<br />
My response was:<br />
<h2>
Ripple won't abandon XRP because it has every incentive to keep XRP but no incentive to abandon it.</h2>
<div>
Below are our message exchanges about this. My thoughts are in parenthesis.</div>
<div>
<br /></div>
<div>
<b>Tiffany:</b> It's incorrect to assume that Ripple would take care of things.</div>
<div>
<b>Robert:</b> It's not Ripple taking care of things, but taking care of itself. </div>
<div>
<b>Tiffany: </b>Ripple continues to remove validators from the network and has a goal to go down to one or even zero. (As if this is an example that Ripple doesn't take care of things and that Ripple is abandoning XRP)</div>
<div>
<b>Robert: </b>This is a serious allegation (I mean the part that Ripple has a goal to go down to one or even zero). And if it's a goal, it should be either one or zero, not "one or even zero".</div>
<div>
<b>Nik: </b>Ripple has a goal to go down to one validator.</div>
<div>
<b>Robert: </b>I am not worrying too much about this as long as Ripple keeps hiring an excellent team to work on rippled and it would be stupid for Ripple to give up this team.</div>
<div>
<b>Nik:</b> Although Ripple has a large and highly skilled team dedicated to development of rippled, I’d prefer to see more external contributors. (I read this as Ripple is still committed to XRP.)</div>
<h2>
Freezing everyone else by increasing reserve so that they could cash out first won't work.</h2>
<div>
Things got heated up on this one. I will only give a high level summary.<br />
<br />
So in the beginning, I assumed that increasing reserve to any amount would always require an amendment and that someone must send a pull request for this amendment to <a href="https://github.com/ripple/rippled">https://github.com/ripple/rippled</a> to get it merged. If anyone does this, I would know because I follow what's happening there. If this pull request gets merged, people with less than 25k in their accounts would start moving their fund immediately. No one will be freezed.</div>
<div>
<br /></div>
<div>
To my surprise, it seemed that Tiffany didn't know how rippled development works, or rather how github projects work in general. It didn't take too long for me to realize that what she really meant may be that the validators can collude privately and thus don't need github.</div>
<div>
<br /></div>
<div>
Then this still can be undone. Because it's easy to create a fork and getting it recognized by the world is going to be easy too, because the old UNL betrayed the world. See this article for technical details <a href="https://r0bertz.blogspot.com/2017/07/several-possible-attack-modes-on-xrp.html">https://r0bertz.blogspot.com/2017/07/several-possible-attack-modes-on-xrp.html</a> </div>
<div>
<br /></div>
<div>
Later <a href="https://twitter.com/xrpscan">XRP Scan</a> pointed out that reserve can be increased to 4294 XRP without introducing an amendment. But 4294 is not a too big number. To increase it to 25k, an amendment is still required. Either way, it can be undone.</div>
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com2tag:blogger.com,1999:blog-12574936.post-76185215927876823602020-02-04T20:19:00.002-08:002020-02-07T01:14:30.844-08:00ripple-client-desktop ported to RippleAPI<b>Disclaimer: this work is provided "as-is" and is not endorsed by or affiliated with Ripple Inc. in anyway.</b><br />
<br />
RippleAPI was one of the APIs (the other one is core API) in <a href="https://github.com/ripple/ripple-lib" target="_blank">ripple-lib</a> before version 0.13.0 which was released in 2015 and has been the only API since 0.13.0.<br />
<br />
<a href="https://github.com/ripple/ripple-client-desktop" target="_blank">ripple-client-desktop</a> was abandoned by Ripple Inc. in 2015. By the time it was abandoned, it could only work with core API.<br />
<br />
I started porting it to RippleAPI in late 2018. The progress was recorded in this twitter thread:<br />
<blockquote class="twitter-tweet">
<div dir="ltr" lang="en">
This weekend I tried to revive ripple-client-desktop. l I have reached a point at which I can run gulp without any warning on the command line. However, the app stuck at loading. Then I figured out that the client uses an ancient ripple-lib API.</div>
— r0bertz (@r0bertz) <a href="https://twitter.com/r0bertz/status/1074570561366323200?ref_src=twsrc%5Etfw">December 17, 2018</a></blockquote>
<br />
<script async="" charset="utf-8" src="https://platform.twitter.com/widgets.js"></script>
You can download the executable files at this link:<br />
<br />
<a href="https://github.com/r0bertz/ripple-client-desktop/releases">https://github.com/r0bertz/ripple-client-desktop/releases</a><br />
<br />
If you want to try it, please try it with testnet account, account with small balances, small transaction size, in that order. Because even though there is no known bug to me, after all this is a one man job. There could be bugs that I haven't seen yet.<br />
<br />
To change server to testnet server, check "Online mode" under Network settings. Testnet server address can be found here <a href="https://xrpl.org/xrp-testnet-faucet.html">https://xrpl.org/xrp-testnet-faucet.html</a>. After changing server, please restart the client because server reconnection is not handled very well in ripple-lib.<br />
<br />
Note that it may take a short while for it to connect for the very first time.<br />
<br />
Here's my tip bot account if anyone feel like chipping in <a href="https://www.xrptipbot.com/u:r0bertz/n:twitter">https://www.xrptipbot.com/u:r0bertz/n:twitter</a><br />
<br />
Thanks!r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com2tag:blogger.com,1999:blog-12574936.post-20109316304973876582019-04-21T10:18:00.002-07:002019-04-21T12:52:11.442-07:00How to file crypto tax for freeI just published the scripts that I used to prepare tax for XRP sales. With no or minimal changes, it should work for any crypto, any exchange.<br />
<br />
The repo is at <a href="https://github.com/r0bertz/node-xrp-tax">https://github.com/r0bertz/node-xrp-tax</a><br />
<br />
Below is the contents of README.md:<br />
<br />
<article class="markdown-body"><h1>
XRP Tax</h1>
This is a collection of scripts to prepare tax for crpyto (not necessarily XRP)
sales. A majority of this project deals with XRP Ledger, so it is called "XRP
Tax". The end product is a csv file that can be uploaded to
<a href="http://www.easytxf.com/">http://www.easytxf.com</a>.<br />
<h3>
Things to note</h3>
<ul>
<li>Terminology:
<ul>
<li><strong>Symbol</strong>: The currency being traded.</li>
<li><strong>Currency</strong>: The currency you paid/got when buying/selling Symbol.</li>
</ul>
</li>
<li>USDT is considered USD.</li>
<li>The csv format (except that of the end product) is <a href="http://bitcoin.tax/">bitcoin.tax</a> format<sup id="a1"><a href="https://www.blogger.com/blogger.g?blogID=12574936#f1">1</a></sup>.</li>
<li>The Source column is overloaded. If Action is SEND, Source is actually
destination.</li>
<li>Only LIFO (Last-In, First-Out) method is implemented.</li>
<li>LIFO method is universally applied for a <strong>Symbol</strong> no matter where the trade
actually happened.</li>
<li><a href="https://www.investopedia.com/terms/l/like-kind_exchange.asp">Like-kind exchange</a> is not supported.
If <strong>Currency</strong> is not USD, it will be converted into USD price.</li>
</ul>
<h2>
Install dependencies</h2>
<pre><code>npm install -g bignumber.js csv dateformat fs lodash node-fetch ripple-lib yargs
</code></pre>
<h2>
Example</h2>
Suppose one guy has traded XRP on XRP Ledger,
<a href="http://www.bitstamp.net/">bitstamp</a> and <a href="http://www.poloniex.com/">poloniex</a>. He
has transferred XRP back and forth between these exchanges. He wants to get a
TXF file for the XRP trades he did in 2018 so that he can import it into
TurboTax.</article><article class="markdown-body"><br />
He has an addresses.json file which looks like:<br />
<pre><code class="language-json">{
"<span class="hljs-attribute">rvYAfWj5gh67oV6fW32ZzP3Aw4Eubs59B</span>": <span class="hljs-value"><span class="hljs-string">"~Bitstamp"</span></span>,
"<span class="hljs-attribute">rpdADzXQJrnHKDJV9p7A4UwHsjT3rhm2cx</span>": <span class="hljs-value"><span class="hljs-string">"~RippleTradeXRPBonus"</span></span>,
}
</code></pre>
<pre><code class="language-json">
</code></pre>
A hint.json file which looks like:<br />
<pre><code class="language-json">{
"<span class="hljs-attribute">~RippleTradeXRPBonus</span>": <span class="hljs-value"><span class="hljs-string">"Gift"</span></span>,
}
</code></pre>
<pre><code class="language-json">
</code></pre>
Bitstamp transaction history file:<br />
<pre><code>bitstamp/Transactions.csv
</code></pre>
<pre><code>
</code></pre>
Poloniex history files:<br />
<pre><code>poloniex/depositHistory.csv
poloniex/tradeHistory.csv
poloniex/withdrawalHistory.csv
</code></pre>
<pre><code>
</code></pre>
The following commands will generate a file that can uploaded to <a href="http://easytxf.com/">easytxf.com</a>.<br />
<pre><code class="language-bash">node XRPL/getTransactions.js --account <span class="hljs-variable">$ACCOUNT</span> --output transactions.json
node XRPL/<span class="hljs-built_in">export</span>Trades.js --account <span class="hljs-variable">$ACCOUNT</span> --input transactions.json --addresses addresses.json --cost_basis_hint hint.json > xrpl.csv
<span class="hljs-comment"># Find out the timestamp for all trades if it is a Gift or if Currency is not USD.</span>
node XRPL/extractPricePoint.js --input xrpl.csv > usd.json
<span class="hljs-comment"># Fill usd.json with XRP price in USD. Some requests may fail due to rate-limiting. Retry as needed.</span>
node fillPricePoint.js --input usd.json
<span class="hljs-comment"># Replace price with price in USD if Currency is not USD.</span>
node XRPL/replacePrice.js --input xrpl.csv --price_file usd.json > xrpl_usd.csv
node bitstamp.js --symbol XRP --input bitstamp/Transactions.csv > bitstamp.csv
node poloniex.js --type deposit --input poloniex/depositHistory.csv > poloniex.csv
node poloniex.js --type trade --input poloniex/tradeHistory.csv >> poloniex.csv
node poloniex.js --type withdraw --input poloniex/withdrawalHistory.csv >> poloniex.csv
cat bitstamp.csv poloniex.csv xrpl_usd.csv > unsorted.csv
sort -t, -k1,<span class="hljs-number">1</span> -k3,<span class="hljs-number">3</span>r -k5,<span class="hljs-number">5</span> unsorted.csv > sorted.csv
<span class="hljs-comment"># Merge a SEND with the immediate next RECEIVE if RECEIVE is equal to or slightly less than SEND.</span>
node mergeSendReceive.js --input sorted.csv > xrp.csv
node profit.js --input xrp.csv --year <span class="hljs-number">2018</span> --combine --easytxf > easytxf.csv
</code></pre>
<pre><code class="language-bash">
</code></pre>
Upload the last file to <a href="http://easytxf.com/">easytxf.com</a> to get a txf file <code>XRP.txf</code>. <a href="http://easytxf.com/">easytxf.com</a>
assumes the cost basis is either short-term covered or long-term covered. It
needs to be changed with:<br />
<pre><code class="language-bash"><span class="hljs-comment"># Change short-term covered (321) to short-term not reported (712)</span>
<span class="hljs-comment"># Change long-term covered (323) to long-term not reported (714)</span>
sed -i <span class="hljs-operator">-e</span> <span class="hljs-string">'s/N321/N712/'</span> <span class="hljs-operator">-e</span> <span class="hljs-string">'s/N323/N714/'</span> XRP.txf
</code></pre>
<pre><code class="language-bash">
</code></pre>
<b id="f1">1</b> The format doesn't really matter. I used to use <a href="http://bitcoin.tax/">bitcoin.tax</a>, not anymore. <a href="https://www.blogger.com/blogger.g?blogID=12574936#a1">↩</a><br />
</article>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-21429247201508354232019-03-10T11:28:00.001-07:002019-03-20T12:23:09.638-07:00Announcing https://orderbook.xrp.ninjaI just made a website <a href="https://orderbook.xrp.ninja/">https://orderbook.xrp.ninja</a>. I have explained why I did it in the front page.<br />
I am going to record some of the problems that I had and how I solved them in this post.<br />
<h4 id="prodcodedoesntwork">
Prod code doesn't work</h4>
The code works in development mode. But it doesn't after minified. The error message was:<br />
<br />
<code>Uncaught Error: [$injector:modulerr] Failed to instantiate module rp due to: Error: [$injector:unpr] Unknown provider: e
</code><br />
<br />
I found a post on stackoverflow and fixed it like <a href="https://github.com/r0bertz/ripple-client-desktop/commit/fe3ad6b3b0b77e41e8ecbd0b72de4ecec111bcdd">this</a>.<br />
<h4 id="adddomaintoanexistingletsencryptcert">
Add domain to an existing Letsencrypt cert</h4>
<code>$ certbot certonly --cert-name rippled.xrp.ninja -d rippled.xrp.ninja,ripple.xrp.ninja,www.xrp.ninja,xrp.ninja,orderbook.xrp.ninja
</code>
<br />
<h4 id="redirecthttptraffictohttpsonlighttpd">
Redirect http traffic to https on lighttpd</h4>
Add this to lighttpd.con and also enable <a href="https://redmine.lighttpd.net/projects/lighttpd/wiki/Docs_ModRedirect">mod_redirect</a>.<br />
<pre><code>$HTTP["scheme"] == "http" {
# capture vhost name with regex conditiona -> %0 in redirect pattern
# must be the most inner block to the redirect rule
$HTTP["host"] =~ ".*" {
url.redirect = (".*" => "https://%0$0")
}
}
</code></pre>
<h4 id="addresponseheaders">
Add response headers</h4>
Use <a href="http://redmine.lighttpd.net/projects/lighttpd/wiki/Docs_ModSetenv">http://redmine.lighttpd.net/projects/lighttpd/wiki/Docs_ModSetenv</a>. Also there is a useful site to scan the header settings of a website:
<a href="https://securityheaders.com/">https://securityheaders.com/</a><br />
<h4 id="httpslinkiniframedowngradedtohttp">
Https link in iframe downgraded to http</h4>
The chart on the orderbook page is an https link to <a href="https://xrpchats.ripple.com/">xrpchats.ripple.com</a>. However, inexplicably the https link was downgraded to http and it can't be displayed since mixing https and http contents is not allowed.<br />
<br />
I tried setting <code>upgrade-insecure-requests</code> in <code>Content-Security-Policy</code>. Then the problem was gone. But later it reappeared. I finally realized this is because ripple changed the link format. See this <a href="https://github.com/r0bertz/xrpl-orderbook/commit/110b48e09d458ae1e0d8fc021a93710cbdd8780a">commit</a> for details.
<br />
<br />
<h4>
Javascript file size too large</h4>
The vendor.js file is too large. I have removed lots of unnecessary code. But after minimization, it's still 1.04 MB. I got the following picture with <a href="https://github.com/webpack-contrib/webpack-bundle-analyzer" target="_blank">webpack-bundle-analyzer</a>. The picture shows gzipped size. The gzipped size (320 KB) is acceptable.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-wBPVqMir5_M/XIWu0rtLzlI/AAAAAAAAjM4/H2M_e-V9iWYyQTK7lhXNgcSE8l-S1pKywCLcBGAs/s1600/vendor.js.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="785" data-original-width="1600" height="313" src="https://3.bp.blogspot.com/-wBPVqMir5_M/XIWu0rtLzlI/AAAAAAAAjM4/H2M_e-V9iWYyQTK7lhXNgcSE8l-S1pKywCLcBGAs/s640/vendor.js.png" width="640" /></a></div>
<br />
To enable compression in lighttpd, mod_compress must be enabled, compress.cache-dir must be setup with proper permission and compress.filetype set to something like this:<br />
<br />
<code>compress.filetype = ("text/plain", "text/html", "text/css", "text/javascript", "application/x-javascript", "application/javascript", "application/font-woff")</code><br />
<br />
Note that I only had <code>"text/javascript"</code> in this list which didn't work. Later I added the other two javascript types and it worked. I don't know how the type is determined though.<br />
<br />
I plan to shrink it further with the help of <a href="https://formidable.com/blog/2018/finding-webpack-duplicates-with-inspectpack-plugin/"> inspectpack-plugin</a>.
<br />
<h4>
Orderbook doesn't update</h4>
See this <a href="https://github.com/r0bertz/ripple-client-desktop/commit/60c9258cb68dd835c7715dac617bd86bdaa85cb4">commit</a> for details.
<br />
<h4>
Use <code>font-display: fallback</code></h4>
See this <a href="https://github.com/r0bertz/xrpl-orderbook/commit/f8ffd182929c1925fb9603e43f851ef7c17b0187">commit</a>.
<br />
<h4>
Set “Cache Control"</h4>
First append hash to js and css file names. See this <a href="https://github.com/r0bertz/xrpl-orderbook/commit/4ac5d48359e39c0ad9bdf528cccdfabb4f13bdf1">commit</a>. This feature was originally there. But it renames index.html as well. To get things work ASAP, I removed this feature without investigating what this does and why it renames <code>index.html</code> until now.
<br />
<br />
Then I added the following code to <code>lighttpd.conf</code>:
<code></code><br />
<pre><code>$HTTP["url"] =~ "(^/$|\.html$)" {
setenv.add-response-header = ( "Cache-Control" =>; "no-cache, public, must-revalidate" )
}
$HTTP["url"] =~ "^/(js|css|img|fonts)/" {
setenv.add-response-header = ( "Cache-Control" =>; "max-age=31536000, public, must-revalidate" )
}
</code></pre>
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-26779553998425556162019-03-09T16:25:00.001-08:002019-03-09T16:28:06.635-08:00Gulp bash completion<a href="https://www.npmjs.com/package/gulp-bash-completion">https://www.npmjs.com/package/gulp-bash-completion</a><br />
<br />
I tried this. I followed the instructions on the above page, but it didn't work.<br />
<br />
Then I did the following and it worked:<br />
<ol>
<li>Locate the <b>gulp-completion.bash</b> file installed by the package.</li>
<li>Change the <b>echo_gulp_tasks</b> variable in <b>gulp-completion.bash</b> file to <b>gulp --tasks-simple</b></li>
<li>Copy <b>gulp-completion.bash</b> to <b>/etc/bash_completion.d</b> and source the file in current shell.</li>
</ol>
Now try type <b>gulp [space]</b> and hit <b>[enter]</b>, the completion should work.<br />
<br />
At this time, this npm package is no longer required. So you can uninstall it.
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-29289813353835175592019-01-04T12:22:00.000-08:002019-01-22T23:17:32.967-08:00Revive ripple-client-desktop<i><b>Update: as of Jan 15, 2019, trading is working.</b></i><br />
<br />
<a href="https://github.com/r0bertz/ripple-client-desktop">https://github.com/r0bertz/ripple-client-desktop</a><br />
<br />
The first goal is to make it fully functional with <a href="https://developers.ripple.com/rippleapi-reference.html" target="_blank">RippleAPI</a>.<br />
<br />
Current status is most read only operations are working except order book.<br />
<br />
Please follow this twitter thread for the most recent updates:<br />
<blockquote class="twitter-tweet" data-lang="en">
<div dir="ltr" lang="en">
This weekend I tried to revive ripple-client-desktop. l I have reached a point at which I can run gulp without any warning on the command line. However, the app stuck at loading. Then I figured out that the client uses an ancient ripple-lib API.</div>
— r0bertz (@r0bertz) <a href="https://twitter.com/r0bertz/status/1074570561366323200?ref_src=twsrc%5Etfw">December 17, 2018</a></blockquote>
<script async="" charset="utf-8" src="https://platform.twitter.com/widgets.js"></script>
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com7tag:blogger.com,1999:blog-12574936.post-7502898484817852912018-11-13T23:15:00.000-08:002018-11-13T23:15:33.308-08:00Custom monitoring graphs for xrp.ninja validatorAs you may know, my rippled validator runs on GCE. So I use stackdriver to monitor it. I created two <a href="https://cloud.google.com/monitoring/custom-metrics/" target="_blank">custom metrics</a> for it.<br />
<br />
One metric is uptime with rippled version as a label. Here's a live graph for this metric. From this graph, you can easily tell what the current version is and when it was upgraded to that version. You can also correlate this with other graphs to see if new version may have caused certain changes in rippled behavior.
<iframe height="400" scrolling="no" seamless="seamless" src="https://public.google.stackdriver.com/public/chart/3013706091720629173?drawMode=color&showLegend=true&theme=light" width="800"></iframe>
<br />
The other metric is the percentage of current uptime that rippled has been in a certain state. Normally the curve for "full" state should asymptotically approach 100. If it is not, then rippled is in trouble.
<iframe height="400" scrolling="no" seamless="seamless" src="https://public.google.stackdriver.com/public/chart/4682804402955104661?drawMode=color&showLegend=true&theme=light" width="800"></iframe>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-15687019736505263302018-11-12T13:28:00.000-08:002018-11-12T13:32:06.717-08:00xrp.ninja is now web-monetizedI know I am have been too lazy. It's just a matter of copy and paste.<br />
<br />
So thanks to any future coil subscriber who visits this blog. Your support will be greatly appreciated.<br />
<br />
PS: here is a howto <a href="https://xrpcommunity.blog/how-to-monetize-your-content-with-coil/">https://xrpcommunity.blog/how-to-monetize-your-content-with-coil/</a>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-51802389408298842592018-04-21T23:48:00.000-07:002018-04-21T23:56:30.280-07:00A rippled API library in Go language<a href="https://github.com/r0bertz/ripple">https://github.com/r0bertz/ripple</a><br />
<br />
I have been working on this lately. It's a fork of its original one. I learned a lot since I started working on it.<br />
<br />
Specifically, I learned there are a lot of inconsistencies in the output of rippled API.<br />
<br />
See for yourself in <a href="https://github.com/rubblelabs/ripple/issues/36#issuecomment-383355198">https://github.com/rubblelabs/ripple/issues/36#issuecomment-383355198</a>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-42042862218689719442018-01-18T09:34:00.001-08:002018-01-18T09:37:41.081-08:00xrp.ninja Ripple validator returns normal since two day agoThere's been some problems with the validator ever since it crashed about a week ago. It doesn't crash any more since I added much more disk space. But it easily falls behind and needs to play catch up several hours after each restart. I learned this from state_accounting field in the output of "rippled server_info". I created a metric and a chart from it. This is what the chart looks for the last week.<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-u1fPLjZgLBA/WmDXveNf0fI/AAAAAAAAc2g/wlc3AncET2QmzW0xy2h6Zw1Sgz4SlePoQCLcBGAs/s1600/states.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="578" data-original-width="484" height="320" src="https://4.bp.blogspot.com/-u1fPLjZgLBA/WmDXveNf0fI/AAAAAAAAc2g/wlc3AncET2QmzW0xy2h6Zw1Sgz4SlePoQCLcBGAs/s320/states.png" width="267" /></a></div>
<div>
The "<a href="https://github.com/ripple/rippled/blob/cca574c9a9bb6f7fa416cf540fcf952cff7a14ce/src/ripple/app/misc/NetworkOPs.h#L85">Full</a>" mode state means it is fully synced and participating in consensus process. You can see it is now asymptotically approaching 100 now. The value means the percentage of uptime the validator stays in each mode.</div>
<div>
<br /></div>
<div>
I figured out why the disk was out of space. It was because the validator fell behind. When that happens, <a href="https://wiki.ripple.com/Online_deletion">online delete</a> is disabled. See this code:</div>
<div>
<br /></div>
<div>
<a href="https://github.com/ripple/rippled/blob/fc0d64f5eec4386db7146251ab1a7fe880bec17c/src/ripple/app/misc/SHAMapStoreImp.cpp#L751">https://github.com/ripple/rippled/blob/fc0d64f5eec4386db7146251ab1a7fe880bec17c/src/ripple/app/misc/SHAMapStoreImp.cpp#L751</a></div>
<div>
<br /></div>
I saw some "Not deleting" messages in the log which led me to the above code.<br />
<div>
<br /></div>
<div>
I still can't determine the exact reason why it fell behind. I suspect it was caused by some "insane" testnet peer. So I blocked some peers with iptables. But now it's almost 100% full and it still has an insane testnet peer.</div>
<div>
<br /></div>
<div>
However I do know why it didn't recover after disk is enlarged. I believe it's because I changed the db to NuDB from RocksDB and still have online_delete set in the config. I changed it because I learned NuDB works better on SSD. But it doesn't support update or delete. It is meant to be used in full history validator. It appears that when it tries to do online_delete, it starts to fall behind. Now I have switched back to RocksDB and everything is fine.</div>
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-34396118189727835442018-01-10T13:17:00.002-08:002018-01-10T13:35:45.121-08:00xrp.ninja Ripple validator crashed last night due to low free disk space<div class="separator tr_bq" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-ct_oTxZpqQI/WlZ9K189I1I/AAAAAAAAcsk/r7GwR_h9QyM5cHmuYiEUHA9crixqP0BKgCLcBGAs/s1600/crash.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="867" data-original-width="1600" height="346" src="https://1.bp.blogspot.com/-ct_oTxZpqQI/WlZ9K189I1I/AAAAAAAAcsk/r7GwR_h9QyM5cHmuYiEUHA9crixqP0BKgCLcBGAs/s640/crash.png" width="640" /></a></div>
<br />
The above graph shows what happened.<br />
<br />
I did get an alert from GCE that disk usage was high. I have an alert policy which says alert me if disk usage is over 80% for more than 5 minutes. However, it was too late, so I didn't get up and thought maybe it could resolve on its own. But it didn't. And GCE didn't keep alerting me, which surprises me.<br />
<br />
Rippled logged these two lines before it died:<br />
<br />
<blockquote class="tr_bq">
2018-Jan-10 11:33:27 Application:FTL Remaining free disk space is less than 512MB<br />
2018-Jan-10 11:33:27 Application:FTL Application::onStop took 23ms</blockquote>
<div>
<br /></div>
<div>
So rippled killed itself:</div>
<div>
<a href="https://github.com/ripple/rippled/search?utf8=%E2%9C%93&q=%22Remaining+free+disk+space+is+less+than+%22&type=">https://github.com/ripple/rippled/search?utf8=%E2%9C%93&q=%22Remaining+free+disk+space+is+less+than+%22&type=</a></div>
<div>
<br /></div>
<div>
Before that, log was flooded with the following messages for 5 hours:</div>
<blockquote>
2018-Jan-10 10:55:08 LoadMonitor:WRN Job: recvGetLedger run: 1390ms wait: 0ms<br />
2018-Jan-10 10:55:32 LoadMonitor:WRN Job: recvGetLedger run: 1250ms wait: 0ms<br />
2018-Jan-10 10:55:32 LoadMonitor:WRN Job: recvGetLedger run: 1533ms wait: 0ms<br />
2018-Jan-10 10:55:32 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1534ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 712ms wait: 1230ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1937ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1927ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1927ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1927ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 2ms wait: 1922ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1924ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1922ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1918ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1913ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1909ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1897ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1897ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1890ms<br />
2018-Jan-10 10:55:33 LoadMonitor:WRN Job: recvGetLedger run: 0ms wait: 1890ms</blockquote>
So it kept getting new ledgers and wrote to the db, till it filled the partition and killed itself.<br />
<br />
I have no idea why it got so many new ledgers, as of now.<br />
<br />
I fixed it by resizing the disk, partition and filesystem.<br />
<br />
I have also changed the db format from RocksDB to NuDB which I should've done when I first started running it.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-57012337642405756182018-01-09T14:54:00.001-08:002018-01-09T14:55:16.157-08:00Ripple's Decentralization Strategy<div style="background-color: white; box-sizing: border-box; color: #353c41; font-family: Roboto, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 14px;">
Copied from the following link:</div>
<div style="background-color: white; box-sizing: border-box;">
<span style="color: #353c41; font-family: "roboto" , "helvetica neue" , "helvetica" , "arial" , sans-serif;"><span style="font-size: 14px;"><a href="https://www.xrpchat.com/topic/16362-rippled-0810-released/?do=findComment&comment=191441">https://www.xrpchat.com/topic/16362-rippled-0810-released/?do=findComment&comment=191441</a></span></span></div>
<div style="background-color: white; box-sizing: border-box;">
<span style="color: #353c41; font-family: "roboto" , "helvetica neue" , "helvetica" , "arial" , sans-serif;"><span style="font-size: 14px;"><br /></span></span></div>
<div style="background-color: white; box-sizing: border-box;">
<span style="color: #353c41; font-family: "roboto" , "helvetica neue" , "helvetica" , "arial" , sans-serif;"><span style="font-size: 14px;"><a href="https://www.xrpchat.com/profile/130-mduo13/">mDuo13</a> wrote this. Kudos to him.</span></span></div>
<div style="background-color: white; box-sizing: border-box; color: #353c41; font-family: Roboto, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 14px;">
<br /></div>
<div style="background-color: white; box-sizing: border-box; color: #353c41; font-family: Roboto, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 14px;">
To recap the Decentralization Strategy, here's a summary:</div>
<ol style="background-color: white; box-sizing: border-box; color: #353c41; font-family: Roboto, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 14px;">
<li style="box-sizing: border-box;">Switch to using a validator list site (vl.ripple.com). This is where we are now.<ul style="box-sizing: border-box;">
<li style="box-sizing: border-box;">All rippled instances configured to use the site can automatically follow Ripple's updates to the recommended set of validators, in lockstep.</li>
<li style="box-sizing: border-box;">In case you're curious, the validator list site publishes cryptographically signed recommendations of validators, so it's not easy to impersonate. And rippled caches the data it gets from the site, so the XRP Ledger won't go down even if vl.ripple.com is down for a while. (It might be tough to bring new rippled servers online while vl.ripple.com is down, but I think there are some protections against that, too.)</li>
</ul>
</li>
<li style="box-sizing: border-box;">Update the site and the existing validators to use validator tokens instead of master validator secret keys.<ul style="box-sizing: border-box;">
<li style="box-sizing: border-box;">This adds security to the existing validators. By using tokens, that Ripple can keep the master validator keys offline and periodically rotate the tokens, for example if an operations engineer who might've had access to the config files leaves the company.</li>
</ul>
</li>
<li style="box-sizing: border-box;">Update the site to add 16 new Ripple-controlled validators to the existing 5.<ul style="box-sizing: border-box;">
<li style="box-sizing: border-box;">The main reason for this is so that any new individual validator isn't too large a slice of the pie.</li>
</ul>
</li>
<li style="box-sizing: border-box;">Add new third-party validators. For every two third-party validators, Ripple will remove a Ripple-controlled validator from the recommended list.<ul style="box-sizing: border-box;">
<li style="box-sizing: border-box;">This will probably occur gradually over the course of 2018 and beyond.</li>
</ul>
</li>
<li style="box-sizing: border-box;">Eventually, as the size of the network has grown, Ripple will encourage others to run validator list sites similar to vl.ripple.com. As long as the lists published on the different sites have sufficient overlap, servers using any list won't fork away from each other.</li>
<li style="box-sizing: border-box;">The "Secret Future Stuff" I alluded to, which may also occur before or as part of step 5.</li>
</ol>
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-10839652412667765192018-01-08T21:45:00.003-08:002018-01-08T21:47:30.941-08:00xrp.ninja Ripple validator upgraded to 0.81.0<div class="separator" style="clear: both; text-align: center;">
</div>
Information about this version can be found here <a href="https://ripple.com/dev-blog/rippled-version-0-81-0/">https://ripple.com/dev-blog/rippled-version-0-81-0/</a>.<br />
<br />
This happened at about 1:45pm local time.<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-PRRpu5IwcJA/WlRWpY4G4xI/AAAAAAAAcqw/oj4K8VK9OyYRW2ff9m89cf6c1BcyBNzVgCLcBGAs/s1600/0.80.0.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="598" data-original-width="762" height="500" src="https://3.bp.blogspot.com/-PRRpu5IwcJA/WlRWpY4G4xI/AAAAAAAAcqw/oj4K8VK9OyYRW2ff9m89cf6c1BcyBNzVgCLcBGAs/s640/0.80.0.png" width="640" /></a></div>
<br />
There were some behavior changes after the upgrade:<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-yb-PIhj-tPY/WlRW3a7uKyI/AAAAAAAAcq4/xha6qKCOarUpTL_5Frs8GUCVS4-uWprEQCLcBGAs/s1600/perf.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="727" data-original-width="1497" height="310" src="https://4.bp.blogspot.com/-yb-PIhj-tPY/WlRW3a7uKyI/AAAAAAAAcq4/xha6qKCOarUpTL_5Frs8GUCVS4-uWprEQCLcBGAs/s640/perf.png" width="640" /></a></div>
<br />r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-75655788159282388932018-01-01T23:33:00.003-08:002018-01-01T23:36:08.585-08:00Monitoring ripple validator running in GCEGCE provides various kinds of metrics from which one can create dashboard, alerting policies etc. However, there is no way to monitor performance of rippled unless we wrote something ourselves.<br />
<br />
Fortunately, GCE allows creating custom metrics. So as a starting point, I decided to create a metric for rippled build_version. This information is very useful. For example, you will be able to tell if the behavior of the server changes after version changes.<br />
<br />
However, I later learned that custom metric can't have "STRING" as its value type. So I created an uptime metric with build version as its label. It works just the same.<br />
<br />
Here is a screenshot of the chart created from this metric:<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-y1fqpDgXW5E/Wks1rvacp2I/AAAAAAAAcoQ/IxT7em3yu_g6rniCmQ_d3NNSQp4NtHwGQCLcBGAs/s1600/Rippled%2BDashboard.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="575" data-original-width="1600" height="228" src="https://4.bp.blogspot.com/-y1fqpDgXW5E/Wks1rvacp2I/AAAAAAAAcoQ/IxT7em3yu_g6rniCmQ_d3NNSQp4NtHwGQCLcBGAs/s640/Rippled%2BDashboard.png" width="640" /></a></div>
<br />
Unfortunately, it seems I can't share this chart publicly, unlike charts created from built-in metrics which can be shared publicly.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-57356381870029581492017-12-20T17:02:00.000-08:002017-12-20T17:02:07.445-08:00What a deflationary currency will bring to the world?I have been wondering about this lately. Then I found this article:<br />
<br />
<a href="http://eliasbizannes.com/blog/2017/10/why-bitcoin-or-another-deflationary-currency-will-lead-to-an-economic-revolution/">http://eliasbizannes.com/blog/2017/10/why-bitcoin-or-another-deflationary-currency-will-lead-to-an-economic-revolution/</a><br />
<br />
TL;DR: as long as investment has higher return then hoarding the deflationary currency, people will invest instead of hoarding.<br />
<br />
Similarly, if market maker can make more than hoarding XRP, market maker will make market instead of hoarding.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-16799543875094184972017-10-21T19:43:00.004-07:002017-10-21T19:52:57.124-07:00How exactly is XRP going to work as a bridging digital asset?Maybe this is obvious all along to some people. Anyway, I just figured this out. So I thought maybe it's worth sharing.<br />
<br />
Previously I thought the bridging consists of two transactions, both on XRP ledger. One from fiat currency A IOU to XRP, the other from XRP to fiat currency B IOU.<br />
<br />
Then I saw this:<br />
<br />
<a href="https://www.xrpchat.com/topic/10981-xrapid-uses-crypto-exchanges-to-route-payments-in-real-time/">https://www.xrpchat.com/topic/10981-xrapid-uses-crypto-exchanges-to-route-payments-in-real-time/</a><br />
<br />
So Miguel Vias said in the pilot they used liquidity on bitstamp and bitso. However it's seems the trading volume of XRP/bitso.MXN since the beginning of 2017 is so low that it's virtually no liquidity there. See this:<br />
<br />
<a href="https://xrpcharts.ripple.com/#/markets/XRP/MXN:rG6FZ31hDHN1K5Dkbma3PSB5uVCuVVRzfn?interval=1d&range=1y&type=candlestick">https://xrpcharts.ripple.com/#/markets/XRP/MXN:rG6FZ31hDHN1K5Dkbma3PSB5uVCuVVRzfn?interval=1d&range=1y&type=candlestick</a><br />
<br />
Then I realized, just like bitstamp, bitso has its own exchange and the liquidity there is much better.<br />
<br />
<a href="https://bitso.com/trade/market/xrp/mxn">https://bitso.com/trade/market/xrp/mxn</a><br />
<br />
So now it's clear to me there is another way for XRP to bridge cross-border payments. The originating party acquires XRP however it wants, buy XRP on XRP ledger using source fiat currency IOU or buy XRP on an exchange then withdraw to its ripple wallet on XRP ledger. Then it deposit the XRP to an exchange. This happens on XRP ledger. Then buy the destination fiat currency using XRP on that exchange. All of these can happen very quickly since transactions on exchanges are also fast.<br />
<br />
Does this make sense? Let me know your thoughts. Thanks!r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-90326876933285186162017-10-20T12:56:00.001-07:002017-10-20T15:12:55.446-07:00More ILP news<br />
An article about <a href="https://interledger.org/">ILP</a> posted on American Express's website. It could mean nothing. But I won't be surprised if AE turned out to be using ILP for real since there's already <a href="https://twitter.com/celio2202/status/919051498981679105" target="_blank">rumor</a> about it.<br />
<a href="https://www.blogger.com/goog_609653558"><br /></a>
<a href="https://www.americanexpress.com/us/content/foreign-exchange/articles/international-payments-hyperledger-interledger/">https://www.americanexpress.com/us/content/foreign-exchange/articles/international-payments-hyperledger-interledger/</a><br />
<br />
everis (NTT Data) confirm their adoption of ILP as the Hyperledger Quilt Project<br />
<br />
<a href="http://insights.everis.co.uk/post/102eihg/everis-ntt-data-confirm-their-adoption-of-ilp-as-the-hyperledger-quilt-project">http://insights.everis.co.uk/post/102eihg/everis-ntt-data-confirm-their-adoption-of-ilp-as-the-hyperledger-quilt-project</a><br />
<br />
These news prove that Ripple's collaboration with Hyperledger to produce the Java implementation of ILP (Hyperledger Quilt Project) is a very brilliant move.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://interledger.org/rfcs/shared/graphs/interledger-model.svg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Interledger Model: Sender, Connectors, Ledgers, Receiver" border="0" class="img-responsive" src="https://interledger.org/rfcs/shared/graphs/interledger-model.svg" /></a></div>
<br />
So what does that mean for XRP? If you are a long time XRP hodler, you probably have already known this. But if you don't: The more ledgers ILP connects, the more payment volume XRP will be able to bridge. See also <a href="https://www.quora.com/Even-if-the-XRP-transaction-is-4-seconds-what-is-the-real-world-use-of-it/answer/David-Schwartz-9?share=6938bd7d">this</a>.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-1599256092217552942017-10-19T12:23:00.002-07:002017-10-20T19:48:01.518-07:00Ripple released Q3 XRP market report<a href="https://ripple.com/insights/q3-2017-xrp-markets-report/">https://ripple.com/insights/q3-2017-xrp-markets-report/</a><br />
<br />
The release caused the price to shot up vertically. Although it fell back a little shortly after.<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-ZmxmiPAyZaM/Wej4nZzd2aI/AAAAAAAAbIw/Pj6Mqop-LQo6kqLC-tGj0BFIxHovWFf6gCLcBGAs/s1600/XRP%2BCharts.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="266" data-original-width="388" height="219" src="https://4.bp.blogspot.com/-ZmxmiPAyZaM/Wej4nZzd2aI/AAAAAAAAbIw/Pj6Mqop-LQo6kqLC-tGj0BFIxHovWFf6gCLcBGAs/s320/XRP%2BCharts.png" width="320" /></a></div>
<br />
The highlights of the report in my opinion are:<br />
<ul>
<li>23 percent Q-o-Q volume increase</li>
<li>More <a href="https://ripple.com/solutions/source-liquidity/">xRapid</a> partnerships to be announced in Q4</li>
</ul>
r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-50698942383649998552017-09-11T13:15:00.002-07:002017-10-18T13:16:53.682-07:00xrp.ninja ripple.txtI have created ripple.txt for my validator, following this instruction:<br />
<br />
<a href="https://wiki.ripple.com/Ripple.txt">https://wiki.ripple.com/Ripple.txt</a>.<br />
<br />
Here is the link to my ripple.txt<br />
<br />
<a href="https://xrp.ninja/ripple.txt">https://xrp.ninja/ripple.txt</a><br />
<br />
Here is my validator:<br />
<br />
<a href="https://xrpcharts.ripple.com/#/validators/nHBTqw7vwjqrSMruoQNYmSXcrBmQHDquG7jgvrsQpurGaVELqdNx">https://xrpcharts.ripple.com/#/validators/nHBTqw7vwjqrSMruoQNYmSXcrBmQHDquG7jgvrsQpurGaVELqdNx</a><br />
<br />
I am going to have ripple employee change the validated domain name from rippled.xrp.ninja to just xrp.ninja.<br />
<br />
The ripple.txt file can be validated here: <a href="https://ripple.com/build/ripple-txt-validator/">https://ripple.com/build/ripple-txt-validator/</a>r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com1tag:blogger.com,1999:blog-12574936.post-12339736563076715712017-07-13T16:12:00.001-07:002017-07-14T10:41:08.249-07:00Several possible attacking modes on XRP ledger <a href="https://www.xrpchat.com/topic/7229-a-question-about-validators/?do=findComment&comment=69555">https://www.xrpchat.com/topic/7229-a-question-about-validators/?do=findComment&comment=69555</a><br />
<br />
There are several degrees of damage, that trusted validators can do (if they decide to give up their hard-earned trust), in increasing difficulty order: <br />
<ol>
<li>If a set of them, each of which only trust others in the same set, with less than 20% of them trust validators not in that set, decide to collude, they can create fork.</li>
<li>If more than 20% of them decide to collude, they can prevent transactions from being validated.</li>
<li>If more than 80% of them decide to collude, they can rewrite history as they wish. </li>
</ol>
<br />
However, as pointed out by mDuo13@, creating a fork is easy, but making people accept it is hard.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-47354905434575184882017-07-10T00:10:00.002-07:002018-01-03T15:51:44.427-08:00Ripple's XRP: Giving the Third-Largest Cryptocurrency a Second Look<a href="http://www.coindesk.com/ripples-xrp-giving-third-largest-cryptocurrency-second-look/">http://www.coindesk.com/ripples-xrp-giving-third-largest-cryptocurrency-second-look/</a><br />
<div>
<br /></div>
<div>
It's not news that coindesk is very biased against Ripple. But publishing such an article is crossing the line. This author either really didn't know Ripple well, or he just wanted to mislead people. It's a shame for coindesk to publish such a garbage.<br />
<br />
I will refute some of the claims made in that article.</div>
<div>
<br /></div>
<blockquote class="tr_bq">
<i>"Instead of using proof-of-work, it relied on a new, unproven consensus protocol."</i></blockquote>
Calling ripple consensus protocol is unproven is a bold assertion. Yet it didn't even try to back it up. On the other hand, XRP ledger has been in use for years and there has been no reports that it doesn't work. And it has defended itself against Stellar's attack once.<br />
<blockquote class="tr_bq">
<i>"This protocol requires users to extend trust to validating servers that produce this consensus."</i></blockquote>
False. Users only need to trust gateway. Users never need to trust validator. Validators need to trust validators. Each validator keeps its trusted peers in UNL. The consensus is achieved if 80% of the validators agree on a set of transactions. The UNL for each validator can be different.<br />
<blockquote class="tr_bq">
<i>"Relying on trust, rather than proof-of-work, kind of makes sense for Ripple, because you need similar trust relationships anyway for IOUs to work."</i></blockquote>
It doesn't make sense to compare trust with proof-of-work. Because consensus in Ripple is not achieved through trust. I just discussed how consensus is achieve in the previous point. Whether or not a single trusted validator validates a transaction doesn't mean anything.<br />
<blockquote class="tr_bq">
<i>"Instead of needing to trust only the mathematics of proof-of-work, you can only trust the XRP token by setting up trust lines that almost inevitably end at Ripple."</i></blockquote>
This is completely nonsense. XRP doesn't need trust. XRP is the native asset on XRP ledger. It doesn't need trust lines. And, trust (whatever he means by it) doesn't bear any resemblance to proof-of-work.<br />
<blockquote class="tr_bq">
<i>"And while in theory anyone can set up such a server, if Ripple does not include your server in their trust lines, then you're not part of the consensus-making process."</i></blockquote>
This is nonsense too. There is no such thing as including a server in trust line. However, a validator does need to be trusted by other validators to participate in the consensus process. But Ripple, the company, doesn't decide whether a validator is trusted or not. Each validator choose their own trusted validators. Ripple, the company, currently does recommend a list of trusted validators. But that doesn't mean everyone must use it.<br />
<blockquote class="tr_bq">
<i>"So, Ripple is highly centralized and XRP is more akin to a PayPal account than a trustless system like bitcoin."</i></blockquote>
The argument that Ripple is centralized only makes sense at this moment if you are referring to the fact that most validators currently trust the UNL that Ripple the company recommends. However, that will change. See <a href="https://ripple.com/insights/how-we-are-further-decentralizing-the-ripple-consensus-ledger-rcl-to-bolster-robustness-for-enterprise-use/">this</a>. It should be noted that it's actually much easier (you read it right, easier) to gain super power in bitcoin network than in ripple network, because in bitcoin network, all you need is the sheer computing power, but in ripple network, you need to make people trust you. It's much harder to gain people's trust.<br />
<br />
Also XRP is not like PayPal at all. Anyone can create a ripple wallet. And there are many ways to activate it. No one can control it but the owner of the wallet. On the other hand, a PayPal account can be terminated by PayPal at any time.<br />
<blockquote class="tr_bq">
"why would liquidity providers not use any other common (reserve) currency like US dollars for that, especially considering the highly volatile price of XRP ?"</blockquote>
Market maker would use XRP instead of USD for bridging asset for the following reasons:<br />
<ol>
<li>USD is inflationary, XRP is deflationary</li>
<li>XRP has some features which make it a better bridging currency on ILP:</li>
<ol>
<li>Autobridging <a href="https://ripple.com/dev-blog/introducing-offer-autobridging/">https://ripple.com/dev-blog/introducing-offer-autobridging/</a></li>
<li>Escrow <a href="https://ripple.com/build/amendments/#escrow">https://ripple.com/build/amendments/#escrow</a></li>
</ol>
</ol>
The high volatility is not an issue. This is already taken into consideration. See the following graph, using high volatility XRP, Ripple's customers (banks) just need to pay more for currency hedging, but still it's cheaper than not using XRP. If XRP market becomes stable, the customer will save even more money.<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4PlbE58_SQ3J4bOAvnmyOZbYaA3zRseEQrHMyxDc-gcMWY74hB8ZlJntzc8Rb9uRSQZW4ACq78WS7ZGzuFpYn2Nrp4tauJ5qUfgtnSE213ccP0pkDCb9JkHn9Jj6DRKZfWept/s1600/ripple-cost.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="958" data-original-width="1600" height="191" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4PlbE58_SQ3J4bOAvnmyOZbYaA3zRseEQrHMyxDc-gcMWY74hB8ZlJntzc8Rb9uRSQZW4ACq78WS7ZGzuFpYn2Nrp4tauJ5qUfgtnSE213ccP0pkDCb9JkHn9Jj6DRKZfWept/s320/ripple-cost.png" width="320" /></a></div>
<br />
<blockquote class="tr_bq">
<i>"In short, it's hard to come up with any rational reason why XRP exists in the Ripple protocol, other than as a means for Ripple to make money."</i></blockquote>
It's just clueless for him to say XRP is just a means for Ripple to make money. Ripple, the company, doesn't make money by selling XRP, at least it won't be their long term revenue source. Their employees doesn't make money by selling XRP. They are not allowed to sell XRP while being employed.<br />
<blockquote class="tr_bq">
<i>"That's like ignoring the estimated 1 million bitcoin in [bitcoin creator] Satoshi Nakamoto's wallet just because they are not circulating at the moment, and may never circulate. "</i></blockquote>
That's totally different. XRP supports escrow. Bitcoin doesn't. If some XRP is put into escrow, it's just impossible for them to go into circulation. Just no way. There is no such guarantee for Satoshi's bitcoin.<br />
<blockquote class="tr_bq">
<i>"ILP was also developed by Ripple, and appears to be a fairly impressive piece of technology to bridge between various blockchains and systems. It's open source, hosted by the Linux Foundation and could become a part of the Hyperledger framework."</i></blockquote>
ILP is not hosted by Linux Foundation. Hyperledger is hosted by Linux Foundation. The only connection between ILP and Linux Foundation is Hyperledger Quilt which is a Java implementation of ILP.<br />
<blockquote class="tr_bq">
<i>"But note that ILP itself has no native token; it doesn't depend on XRP and doesn't add value to it. Even if ILP finds wide adoption in the fintech industry, it will do precious little for XRP."</i></blockquote>
ILP provides a level playground for bridging assets in which XRP by far seems to be the single player. Using bridging asset will have great benefits for banks because banks doesn't need to keep cash in nostro accounts any more.<br />
<blockquote class="tr_bq">
<i>"As for the moonshot of replacing Swift; first of all, I highly doubt a global consensus protocol is the right approach and could even scale to that level. But also, banks currently control Swift. How likely is it they would relinquish control to a small startup and allow themselves to become beholden to its private currency, that they have no need for? I just don't see that happening."</i></blockquote>
It's not XRP ledger that will replace Swift. It's ILP which is not a global consensus protocol. Swift is testing Hyperledger Fabric which will allow Swift to have real-time settlement ability, just like ILP. However, Ripple's solution will still have advantage over Swift's Hyperledger Fabric solution. See <a href="https://ripple.com/insights/empire-strikes-back/">https://ripple.com/insights/empire-strikes-back/</a> The empire will be defeated. And the lethal weapon will just be XRP.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0tag:blogger.com,1999:blog-12574936.post-54912175595116387412017-06-30T13:21:00.000-07:002017-06-30T13:21:07.570-07:00This article effectively pointed out ripple will be one of the final winners and yet it didn't know it<a href="http://www.zerohedge.com/news/2017-06-30/understanding-cryptocurrency-boom-and-its-volatility">http://www.zerohedge.com/news/2017-06-30/understanding-cryptocurrency-boom-and-its-volatility</a><br />
<br />
It says:<br />
<br />
<i>speculative booms eventually end and technologies mature into forms that solve real business problems in uniquely cheap and robust ways no other technology can match.</i><br />
<br />
That said technology exists today. It is Ripple/XRP.r0bertzhttp://www.blogger.com/profile/10735554351217955776noreply@blogger.com0