b'PRIVATE LITIGATION GOODWINinterest less (2) the amount for which the plaintiff soldThe defendants moved to dismiss the complaint the security and any income the plaintiff receivedbecause (1) the federal securities claims were barred by on the security. The court held: Because investorsthe three-year statute of repose, (2) the plaintiff failed purchased CTR Tokens using Bitcoin or Ethereum,to state a federal securities claim, and (3) the plaintiff the Securities Act requires that Plaintiffs damages befailed to state a California securities claim.calculated in terms of Bitcoin or Ethereum in orderFirst, the court rejected the defendants argument that to place the Plaintiffs back in their pre-investmentthe federal securities claims were barred by the three-position. The court concluded: The Plaintiffs . . . didyear statute of repose. The court held that the three-not use U.S. dollars to pay for the CTR Tokens and thisyear statute of repose began to run when XRP was first measure of damages would not place investors backbona fide offered (i.e., when it was genuinely offered to in their pre-investment position. Accordingly, the Courtthe public). The court concluded that it could not find finds no basis to reconsider its prior ruling. that Ripple made its first bona fide public offering of XRP more than three years before the plaintiff filed suit Zakinov v. Ripple Labs, Inc., No. 18-cv-06753,(i.e., before August 5, 2016) based on the complaints 2020 WL 922815 (N.D. Cal. Feb. 26, 2020) allegations and judicially noticeable factsespecially On February 26, 2020, the U.S. District Court for thegiven the substantial volume of XRP sales that Northern District of California granted in part andallegedly have occurred since 2017. The court warned, denied in part the motion of Ripple Labs, Inc. and XRPhowever, that it might revisit its determination once the II (collectively, Ripple) to dismiss a putative securitiesparties have developed a factual record.class action complaint. The complaint brought claimsSecond, the court rejected the defendants arguments for violations of federal and California securities lawsthat the plaintiff failed to state a claim under the arising out of the sale of tokens called XRP. federal securities laws for the sale of unregistered According to the complaint, Ripple sells XRP to retailsecurities because he failed to allege that (1) he consumers in exchange for legal tender or otherpurchased his XRP in an initial distribution as opposed cryptocurrencies, to larger investors wholesale, andto the secondary market and (2) the defendants to the general public on cryptocurrency exchanges. Inqualified as sellers within the meaning of Section 2013, Ripple generated 100 billion units of XRP, gave12(a)(1) of the Securities Act. Specifically, the court held 20 billion XRP to its founders, and kept the remainingthat Section 12(a)(1) did not require the plaintiff to have 80 billion XRP. Ripple has placed a substantialpurchased his XRP in an initial distribution, but rather percentage of XRP that it owns in escrow and has adopted an escrow plan to allow investors to verify mathematically the maximum supply of XRP that can enter the market. In 2017 and 2018, Ripple rapidlyThe court held that Section 12(a)(1) did not require accelerated the sale of XRP to the publicincreasingthe plaintiff to have purchased his XRP in an initial efforts to engage in distribution strategies aimed at thedistribution, but rather that the court may consider public that would result in stabilizing or strengtheninga claim for purchases in the secondary market. XRP exchange rates against other currenciesand earned more than US $1.1 billion through a combination of direct, exchange, institutional, and programmatic sales of XRP. XRP has not been registered as a security under federal or California law.18'