Yesterday, Wednesday, April 26, the class certification hearing was held in the lawsuit Zakinov against Ripple Labs for selling XRP as an unregistered security. As Bitcoinist was the first to report yesterday, the hearing was about the certification of the group of XRP owners suing Ripple.
Lead plaintiff Vladi Zakinov, who owned XRP for just two weeks, seeks to be the lead plaintiff in the class action lawsuit. He argues that XRP is a security which has been issued by Ripple. Sostak is asking the court to form a class consisting of all XRP owners who bought and now hold XRP or who sold XRP at a loss.
How The Class Action Hearing Vs. Ripple Went Down
The hearing was held via Zoom and had space for 500 registrations from the public. XRP community attorney John E. Deaton, who is an amicus in the Ripple SEC case, also filed for amicus status in the Zakinov litigation.
Unlike the SEC case, however, the judge assigned to the case did not allow amicus counsel to appear at oral argument. Accordingly, Deaton states about the course of the hearing:
I’ve never been so frustrated in my legal career watching this zoom hearing. Mainly because I can’t speak and address the questions and issues being asked by the Judge. The problem is no one understands the tech.
Remarkably, the judge stated during the hearing that she had even attended a seminar on crypto before this hearing and came out just as confused as she was before the hearing. Accordingly, the hearing can be described as very tedious and lacking in clarity.
One example is the judge’s debate on whether the more than 75,000 XRP holders who support Ripple in its lawsuit against the US Securities and Exchange Commission (SEC) can be excluded from the class action. The backdrop is that the class action would include all XRP holders around the world – even in countries where XRP has already been classified as a non-security (like in the United Kingdom).
In response, Nick Spear, the lawyer for the complainant Zakinov, stated that the 75,000 XRP holders are “fake” and therefore irrelevant. Spear subsequently explained how damage calculations can be made. Nevertheless, judge Phyllis J. Hamilton replied that she is skeptical of the “worldwide class action” and explained that there is no precedent.
Ripple attorney Andrew Michaelson also discussed that XPR buyers didn’t rely on Ripple, including overseas. He also presented evidence of the 75,000 XRP holders who support Ripple in the SEC case and do not want to be part of the class action. Michaelson also laid out why a “class” is not a solution to force 74 holders to “opt out.”
Furthermore, the judge inquired whether it matters why holders buy crypto and inquired about the Howey test as an objective test. She sought to understand that cryptocurrencies have a use case.
Michaelson laid out several of them, including cross-border payments, and agreed with the judge that the use case is important. In addition, the Ripple attorney emphasized that the plaintiffs were making a purchase on the secondary market and thus there was no written contract between the plaintiff and the defendant.
Ripple’s counsel also endeavored to explain how the complainant’s experience in day trading reflected that he was not dependent on Ripple’s efforts by buying and trading intraday. Zakinov’s counsel, on the other hand, countered that marketing materials were relevant, that a contract was not necessary because of the “scheme,” and that the “Mayfield” case is clear.
Thus, the findings from the hearing are limited. The judge is now reviewing the facts if Zakinov is allowed to lead the class. The outcome is open. The next date is May 8, 2023, when plaintiff Zakinov’s expert disclosures are due.
At press time, the XRP price traded at $0.4613.
Featured image from Vauld, chart from TradingView.com