Delaware Court Dismisses Lead Investor's Lawsuit Against Ripple

Delaware Court Dismisses Lead Investor's Lawsuit Against Ripple

March 7, 2021

Key Takeaways

  • The Delaware Chancery Court has rejected Tetragon’s appeal to redeem its full investment in Ripple.
  • Tetragon had an agreement with Ripple that if XRP was declared a security, it had the right to redeem investment.
  • The court has sided with Ripple on the case, and said a determination has not been made whether XRP is a security.

A Delaware court has rejected Tetragon’s appeal to pull out its equity in blockchain payments firm Ripple Labs.

Court Stands With Ripple

The Delaware Chancery Court court denied Tetragon’s appeal to redeem stock in Ripple as a result of its ongoing battle with the U.S. Securities and Exchange Commission (SEC)

The court dismissed the case, for the SEC has not yet officially determined XRP’s legal status.

In Jan. 2021, Tetragon sought a preliminary injunction in Delaware Chancery Court to redeem its investment share in Ripple.

In 2019, Ripple raised $200 million during the Series C funding round, with Tetragon as the lead investor. In the investment contract, there was a provision that if XRP is declared security on an official basis, then Tetragon had the right to request Ripple to redeem ownership shares in cash.

Tetragon contended that the SEC’s enforcement action against Ripple over XRP sales constituted an official securities violation, and therefore Ripple should return the funds.

The court sided with Ripple on the case and said a determination had not been made whether XRP is, in fact, an official security asset.

“But XRP is no more security after the SEC filed the enforcement action than it was before it,” the Delaware Court judge stated. “The enforcement action, by contrast, asks that question. The question is not yet resolved, so a determination has not yet been made. And when it is made, it will be made by the District Court.”

Rippe released a statement in which the company affirmed the Tetragon lawsuit was an “opportunistic move to take advantage of the SEC allegations”.

The statement added that the latest ruling should end the confusion that the SEC has not determined that XRP is a security.

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