• The nature of the lawsuit
• The "three-rear clock"

The United States Court of Appeals for the Ninth Circuit has now put to a definitive end one of the crypto industry’s longest-running legal battles by dismissing the Sostack v. Ripple Labs class action.

The appellate panel ruled that lead plaintiff Bradley Sostack’s federal securities claims were "time-barred" by the Securities Act’s three-year statute of repose. 

The nature of the lawsuit

The case was a consolidated class action originally filed in 2018. It centered on allegations that Ripple Labs, its subsidiary XRP II, LLC, and CEO Brad Garlinghouse violated the federal securities laws by selling XRP as an unregistered security.

Bradley Sostack, the court-appointed lead plaintiff, purchased XRP in January 2018 during the height of the crypto bull market. 

Sostack ended up suing to recover his losses following a price crash. The plaintiff argued that Ripple had conducted an illegal public offering without a registration statement.

However, the lawsuit ran headlong into a strict federal deadline known as the statute of repose.

The "three-rear clock"

Under Section 13 of the Securities Act, no action can be brought to enforce liability for unregistered sales more than three years after the security was "bona fide offered to the public".

The Ninth Circuit agreed with the district court’s finding that this clock began ticking in 2013, not 2017 or 2018.

The court noted that Ripple had made XRP available to the public as early as 2013, selling over 500 million tokens on the XRP Ledger’s built-in exchange during that year.

Based on the 2013 start date, the three-year window to file a federal securities claim expired in 2016.

Since Sostack did not file his original complaint until 2018, his claims were dead on arrival.

"His federal securities claims are time-barred," the panel wrote, affirming the lower court’s summary judgment in favor of Ripple.

Another failed attempt

In order to save the case, the plaintiffs started claiming that the company's activities in 2017 represented a new offering.. This, according to them,  should have restarted the three-year clock.

The Ninth Circuit firmly rejected this theory. It dismantled the idea that the 2017 sales were legally distinct from the 2013 launch.

"The nature of XRP did not change between 2013 and 2017," the court stated in its memorandum. "All XRP cryptocurrency remained fungible and interchangeable.".

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