Ripple Motion To Dismiss

Case 4:18-cv-06753-PJH Document 70 Filed 09/19/19 Page 1 of 36
1 Kathleen R. Hartnett (SBN 314267)

BOIES SCHILLER FLEXNER LLP
2 44 Montgomery Street, 41st Floor
San Francisco, CA 94104
3 Telephone: (415) 293-6800
Facsimile: (415) 293-6899
4 Email: khartnett@bsfllp.com
5 Damien J. Marshall (pro hac vice admitted)
6 55 Hudson Yards, 20th Floor
New York, NY 10001
7 Telephone: (212) 446-2300
Facsimile: (212) 446-2350
8 Email: dmarshall@bsfllp.com
9 Andrew J. Ceresney (pro hac vice pending)
DEBEVOISE & PLIMPTON LLP
10 919 Third Avenue
New York, NY 10022
11 Telephone: (212) 909-6000
Facsimile: (212) 909-6836
12 Email: aceresney@debevoise.com
13 Attorneys for Defendants Ripple Labs Inc.,
XRP II, LLC, and Bradley Garlinghouse
14
15 UNITED STATES DISTRICT COURT

16 NORTHERN DISTRICT OF CALIFORNIA
17 OAKLAND DIVISION
18 In re RIPPLE LABS INC. LITIGATION, Case No. 18-cv-06753-PJH

19
NOTICE OF MOTION AND MOTION TO
20 This Document Relates To: DISMISS CONSOLIDATED COMPLAINT
All Actions FOR VIOLATIONS OF FEDERAL AND
21 CALIFORNIA LAW; MEMORANDUM OF
POINTS AND AUTHORITIES IN SUPPORT
22
Date: January 15, 2020
23 Time: 9:00 a.m.
Place: Courtroom 3
24 Judge: Hon. Phyllis J. Hamilton
25 Consolidated Complaint filed: August 5, 2019

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MOTION TO DISMISS CONSOLIDATED COMPLAINT

CASE NO. 18-cv-06753-PJH
1 NOTICE OF MOTION AND MOTION

2 PLEASE TAKE NOTICE that on January 15, 2020, at 9:00 a.m., or as soon thereafter as the
3 matter may be heard, in the courtroom of the Honorable Phyllis J. Hamilton, United States District
4 Judge, Northern District of California, located at 1301 Clay Street, Oakland, CA 94612, Courtroom 3,
5 the undersigned Defendants, Ripple Labs Inc. (“Ripple”), XRP II, LLC (“XRP II”), and Bradley
6 Garlinghouse (collectively, “Defendants”), will move the Court to dismiss Lead Plaintiff Bradley
7 Sostack’s (“Plaintiff’s”) Consolidated Complaint for Violations of Federal and California Law
8 (“Complaint”). Defendants’ Motion is made pursuant to Rule 12(b)(6) of the Federal Rules of Civil
9 Procedure and seeks dismissal of the Complaint with prejudice.
10 This Motion is based on this Notice of Motion and supporting Memorandum of Points and
11 Authorities, Request for Judicial Notice, the Declaration of Kathleen Hartnett filed in support thereof,
12 reply briefing in further support of this Motion, any matters of which this Court may take judicial notice,
13 the files in this action, the arguments of counsel, and any such other matters as the Court may consider.
14
15 Dated: September 19, 2019 Respectfully Submitted,

16
By: /s/ Kathleen R. Hartnett
17
Kathleen R. Hartnett (SBN 314267)
18 BOIES SCHILLER FLEXNER LLP
44 Montgomery Street, 41st Floor
19 San Francisco, CA 94104
Telephone: (415) 293-6800
20 Facsimile: (415) 293-6899

New York, NY 10001
24 Telephone: (212) 446-2300
25 Facsimile: (212) 446-2350
Email: dmarshall@bsfllp.com
26
Andrew J. Ceresney (pro hac vice pending)
27 DEBEVOISE & PLIMPTON LLP
919 Third Avenue
28 New York, NY 10022
i
1 Telephone: (212) 909-6000

Facsimile: (212) 909-6836
3
Attorneys for Defendants Ripple Labs Inc.,
4 XRP II, LLC, and Bradley Garlinghouse
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1 TABLE OF CONTENTS
2 MEMORANDUM OF POINTS AND AUTHORITIES .............................................................................1
3 I. INTRODUCTION ...........................................................................................................................1
4 II. STATEMENT OF ISSUES TO BE DECIDED ..............................................................................2
5 III. FACTUAL BACKGROUND ..........................................................................................................3
6 A. Defendants ...........................................................................................................................3
7 B. XRP and the XRP Ledger ....................................................................................................3
8 C. XRP Sales, Including Plaintiff’s Alleged Purchases ...........................................................4
9 IV. STANDARD OF REVIEW .............................................................................................................4
10 V. PLAINTIFF’S FEDERAL SECURITIES CLAIMS ARE BARRED BY THE
STATUTE OF REPOSE AND FAIL TO STATE A CLAIM (Counts 1, 2)...................................5
11
A. Plaintiff’s Securities Act Claims Are Barred By The Act’s Statute Of Repose ..................5
12
2. Plaintiff’s Allegations Demonstrate That He Brought This Action More
13 Than Three Years After Defendants Allegedly First Offered XRP To
The Public ................................................................................................................7
14
3. Plaintiff’s Effort to Plead Around Section 13 Fails .................................................8
15
B. Plaintiff’s Securities Act Claims Fail Because He Does Not Plausibly Allege
16 That He Purchased XRP In An “Initial Distribution” ........................................................10
17 C. Plaintiff’s Securities Act Claims Fail Because He Does Not Plausibly Allege
That He Purchased XRP From Any Defendant .................................................................11
18
1. Plaintiff Does Not Allege That Any Defendants Passed Title To Him .................12
19
2. Plaintiff Does Not Allege That Any Defendant Solicited His Purchases ..............13
20
D. Plaintiff Fails To State A Claim Under Section 15............................................................14
21
VI. PLAINTIFF FAILS TO STATE ANY CLAIMS UNDER THE CALIFORNIA
22 CORPORATIONS CODE (Counts 3, 4, and 5) ............................................................................15
23 A. Plaintiff’s “Unqualified” Securities Claims Fail (Counts 3 And 5, Cal. Corp.
Code §§ 25110, 25503, and 25504) ...................................................................................15
24
1. Plaintiff Fails To Allege An “Issuer Transaction” .................................................15
25
2. Plaintiff Fails To Allege Privity With Defendants ................................................15
26
3. Plaintiff Fails To Allege His XRP Transaction Occurred “In This State” ............16
27
4. Control Person Liability Is Unavailable Absent A Primary Violation ..................17
28
B. Plaintiff’s Misrepresentation Claim Fails (Count 4)..........................................................17
iii
1 1. Plaintiff Fails To Allege Privity Or An In-State Transaction ................................17

2 2. Plaintiff Fails To Identify Any Statements Made By Defendants
“In Connection With” Plaintiff’s XRP Purchases .................................................18
3
3. Plaintiff Fails To Allege An Actionable Misstatement Under Rule 9(b) ..............18
4
4. Plaintiff Cannot Sustain A Material Assistance Claim Under Section 25504.1
5 Because He Failed To Allege A Primary Violation Or Plead
With Particularity ...................................................................................................22
6
VII. PLAINTIFF’S CALIFORNIA CONSUMER PROTECTION CLAIMS MUST BE
7 DISMISSED (Counts 6, 7) ............................................................................................................23
8 A. Plaintiff’s Consumer Claims Fail Because They Relate To “Securities Transactions”.....23
9 B. Plaintiff’s Consumer Claims Are Barred By The FAL and UCL’s Safe
Harbor ................................................................................................................................24
10
C. Plaintiff’s Consumer Protection Claims Are Insufficiently Pled Under
11 Rule 9(b) ............................................................................................................................24
12 VIII. CONCLUSION ..............................................................................................................................25
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iv
1 TABLE OF AUTHORITIES
2 Cases
3 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC

158 Cal. App. 4th 226 (2007) ......................................................................................................... 17, 18
4
AREI II Cases
5 2016 Cal. App. 4th, 1004 (2013) .......................................................................................................... 22
6 Ashcroft v. Iqbal
556 U.S. 662 (2009) ................................................................................................................ 5, 9, 11, 13
7
Betz v. Trainer Wortham & Co.
8 829 F. Supp. 2d 860 (N.D. Cal. 2011) .................................................................................................. 23
9 Bowden v. Robinson
67 Cal. App. 3d 705 (Ct. App. 1977) .................................................................................................... 16
10
Bowen v. Ziasun Tech.
11 116 Cal. App. 4th 777 (2004) ........................................................................................................... 2, 23
12 Cal. Pub. Emp. Ret. Sys. v. ANZ Sec., Inc.
137 S. Ct. 2042 (2017) .................................................................................................................... 6, 7, 9
13
Calderon v. Total Wealth Mgmt., Inc.
14 2017 WL 6272096 (S.D. Cal. Jan. 19, 2017)........................................................................................ 22
15 Calderon v. Total Wealth Mgmt., Inc.
2018 WL 1621397 (S.D. Cal. Apr. 4, 2018) ......................................................................................... 22
16
Cel-Tech Commc’ns, Inc. v. L.A. Cell. Tel. Co.
17 20 Cal. 4th 163 (1999) .................................................................................................................... 23, 24
18 CFTC v. McDonnell
287 F. Supp. 3d 213 (E.D.N.Y.2018) ..................................................................................................... 3
19
Diamond Multimedia Sys., Inc. v. Superior Court
20 19 Cal. 4th 1036 (1999) .................................................................................................................. 16, 17
21 Doan v. Singh
2013 WL 3166338 (E.D. Cal. June 20, 2013) ................................................................................ 19, 21
22
Garcia v. M-F Athletic Co., Inc.
23 2012 WL 531008 (E.D. Cal. Feb. 17, 2012) ......................................................................................... 13
24 Great Pac. Sec. v. Barclays Capital, Inc.
743 Fed. App’x 780 (9th Cir. 2018) ..................................................................................................... 25
25
Greenberg v. Sunrun, Inc.
26 233 F. Supp. 3d 764 (N.D. Cal. 2017) .................................................................................................. 19
27 Gustafson v. Alloyd Co., Inc.
513 U.S. 561 (1995) .............................................................................................................................. 10
28
v
1 Hadley v. Kellogg Sales Company

243 F. Supp. 3d 1074 (N.D. Cal. 2017) ................................................................................................ 24
2
Hall v. Sea World Entm’t, Inc.
3 2015 WL 9659911 (S.D. Cal. Dec. 23, 2015) ...................................................................................... 25
4 In re Am. Principals Holdings, Inc. Sec. Litig.
1987 WL 39746 (S.D. Cal. July 9, 1987) ............................................................................................. 16
5
In re Bare Escentuals, Inc. Sec. Litig.
6 745 F. Supp. 2d 1052 (N.D. Cal. 2010) ................................................................................................ 12
7 In re Countrywide Fin. Corp. Mortgage-Backed Sec. Litig.
2012 WL 1322884 (C.D. Cal. Apr. 16, 2012) ................................................................................ 13, 14
8
In re Gilead Scis. Sec. Litig.
9 536 F.3d 1049 (9th Cir. 2008) ................................................................................................................ 5
10 In re Harmonic, Inc., Sec. Litig.
2006 WL 3591148 (N.D. Cal. Dec. 11, 2006) ...................................................................................... 13
11
In re IndyMac Mortgage-Backed Sec. Litig.
12 793 F. Supp. 2d 637 (S.D.N.Y. 2011) .................................................................................................... 6
13 In re Longfin Corp. Sec. Class Action Litig.
2019 WL 1569792 (S.D.N.Y. Apr. 11, 2019) ...................................................................................... 12
14
In re Nat’l Mortgage Equity Corp. Mortgage Pool Certificates Sec. Litig.
15 636 F. Supp. 1138 (C.D. Cal. 1986) ....................................................................................................... 6
16 In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection HDTV Television Litig.
758 F. Supp. 2d 1077 (S.D. Cal. 2010) ................................................................................................. 25
17
In re Violin Memory Sec. Litig.
18 2014 WL 5525946 (N.D. Cal. Oct. 31, 2014) .......................................................................... 12, 14, 15
19 Irving Fireman’s Relief & Ret. Fund v. Uber Techs., Inc.
2018 WL 4181954 (N.D. Cal. Aug. 31, 2018) ..................................................................................... 21
20
Jackson v. Fischer
21 931 F. Supp. 2d 1049 (N.D. Cal. 2013) .......................................................................................... 16, 17
22 Kainos Labs., Inc. v. Beacon Diagnostics, Inc.
1998 WL 2016 2016634 (N.D. Cal. Sept. 14, 1998) ............................................................................ 23
23
Kelter v. Forrest
24 2008 WL 11342628 (C.D. Cal. July 2, 2008) ....................................................................................... 23
25 Konik v. Cable
2009 WL 10681970 (C.D. Cal. Dec. 2, 2009) ...................................................................................... 17
26
Lewis v. City and Cty. of San Francisco
27 2012 WL 909801 (N.D. Cal. Mar. 16, 2012).......................................................................................... 9
28
vi
1 Lockheed Martin Corp. v. Network Solutions, Inc.

194 F.3d 980 (9th Cir. 1999) ................................................................................................................ 25
2
Loeffler v. Target Corp.
3 58 Cal.4th 1081 (2014) ......................................................................................................................... 24
4 Maine State Ret. Sys. v. Countrywide Fin. Corp.
2011 WL 4389689 (C.D. Cal. May 5, 2011) .................................................................................. 13, 14
5
Mauser v. Marketbyte LLC
6 2013 WL 12073832 (S.D. Cal. Jan. 4, 2013).................................................................................. 18, 21
7 McCormick v. Indep. Life & Annuity Co.
794 F.3d 817 (7th Cir. 2015) .................................................................................................................. 6
8
Meadows v. Pac. Inland Sec. Corp.
9 36 F. Supp. 2d 1240 (S.D. Cal. 1999) ................................................................................................... 10
10 Metzler Inv. GMBH v. Corinthian Colleges, Inc.
540 F.3d 1049 (9th Cir. 2008) .............................................................................................................. 11
11
Miguel v. Country Funding Corp.
12 309 F.3d 1161 (9th Cir. 2002) ................................................................................................................ 6
13 Mirkin v. Wasserman
5 Cal. 4th 1082 (1993) .......................................................................................................................... 15
14
Mohebbi v. Khazen
15 50 F. Supp. 3d 1234 (N.D. Cal. 2014) .................................................................................................. 23
16 Mori v. Saito
2013 WL 1736527 (S.D.N.Y. Apr. 19, 2013) ........................................................................................ 6
17
Mosco v. Motricity, Inc.
18 649 F. App’x 526 (9th Cir. 2016) ......................................................................................................... 21
19 Muehlenberg v. Experian Info. Solutions, Inc.
2017 WL 6622837 (N.D. Cal. Dec. 28, 2017) ........................................................................................ 5
20
Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund
21 135 S. Ct. 1318 (2015) .......................................................................................................................... 20
22 P. Stolz Fam. P’ship, L.P. v. Daum
355 F.3d 92 (2d Cir. 2004) ................................................................................................................. 6, 9
23
Pinter v. Dahl
24 486 U.S. 622 (1988) .................................................................................................................. 12, 13, 14
25 Pom Wonderful LLC v. Coca Cola Co.
2013 WL 543361 (C.D. Cal. Feb. 13, 2013) ........................................................................................ 24
26
PPM Am., Inc. v. Marriott Corp.
27 853 F. Supp. 860 (D. Md. 1994) ........................................................................................................... 14
28
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1 Retail Wholesale & Dep’t Store Union Local 338 Ret. Fund v. Hewlett-Packard Co.
845 F.3d 1268 (9th Cir. 2017) ........................................................................................................ 20, 21
2
Rosenzweig v. Azurix Corp.
3 332 F.3d 854 (5th Cir. 2003) ................................................................................................................ 13
4 Rubke v. Capital Bancorp Ltd.
551 F.3d 115 (9th Cir. 2009) ................................................................................................................ 20
5
S.F. Residence Club, Inc. v. Amado
6 773 F. Supp. 2d 822 (N.D. Cal. 2011) .................................................................................................. 23
7 SEC v. W.J. Howey Co.
328 U.S. 293 (1946) .............................................................................................................................. 21
8
SIC Metals, Inc. v. Hyundai Steel Co.
9 2018 WL 6842958 (C.D. Cal. Nov. 14, 2018)................................................................................ 18, 22
10 Siegal v. Gamble
2016 WL 1085787 (N.D. Cal. Mar. 21, 2016).......................................................................... 16, 22, 23
11
Swartz v. KPMG LLP
12 476 F.3d 759 (9th Cir. 2007) ................................................................................................................ 19
13 Taddeo v. Am. Invsco Corp.
2012 WL 1947897 (D. Nev. May 30, 2012) ........................................................................................... 6
14
Tarmann v. State Farm Mut. Auto. Ins. Co.
15 2 Cal. App. 4th 153 (1991) ................................................................................................................... 19
16 Toombs v. Leone
777 F.2d 465 (9th Cir. 1985) .................................................................................................................. 6
17
Torion v. JPMorgan Chase Bank., Nat. Assoc.
18 2017 WL 2986250 (N.D. Cal. July 13, 2017)......................................................................................... 5
19 United Hous. Found., Inc. v. Forman
421 U.S. 837 (1975) .............................................................................................................................. 10
20
United States v. Naftalin
21 441 U.S. 768 (1979) .............................................................................................................................. 10
22 Varjabedian v. Emulex Corp.
888 F.3d 399 (9th Cir. 2018) ................................................................................................................ 10
23
Vess v. Ciba-Geigy Corp. USA
24 317 F.3d 1097 (9th Cir. 2003) ................................................................................................................ 5
25 Viterbi v. Wasserman
191 Cal. App. 4th 927 (2011) ............................................................................................................... 15
26
Welgus v. TriNet Grp., Inc.
27 2017 WL 6466264 (N.D. Cal. Dec. 18, 2017) ...................................................................................... 12
28
viii
1 Welgus v. TriNet Grp., Inc.

765 F. App’x 239 (9th Cir. 2019) ......................................................................................................... 12
2
Wolph v. Acer Am. Corp.
3 2009 WL 2969467 (N.D. Cal. Sept. 14. 2009) ..................................................................................... 24
4 XOMA Corp. Sec. Litig.
1990 WL 357807 (N.D. Cal. Dec. 27, 1991) ........................................................................................ 14
5
Youngers v. Virtus Inv. Partners, Inc.
6 195 F. Supp. 3d 499 (S.D.N.Y. 2016) .................................................................................................. 14
7 Statutes
8 Cal. Corp. Code § 25008(a) ...................................................................................................................... 16
9 Cal. Corp. Code § 25110..................................................................................................................... 15, 16
10 Cal. Corp. Code § 25503............................................................................................................... 15, 16, 17
11 Cal. Corp. Code § 25504............................................................................................................... 15, 17, 22
12 False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq. ....................................................... passim
13 Securities Act § 12(a)(1), 15 U.S.C. § 77l(a)(1) ................................................................................ passim
14 Securities Act § 13, 15 U.S.C. § 77m. .......................................................................................... 6, 7, 9, 14
15 Securities Act § 2(a)(1), 15 U.S.C. § 77b(a)(1) ........................................................................................ 21
16 Securities Act § 3(a)(10), 15 U.S.C. § 78c(a)(10) .................................................................................... 21
17 Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et. seq............................................. 2, 3, 23, 25
18 Rules
19 Fed. R. Civ. P. 9(b) ............................................................................................................................ passim
20 Fed. R. Civ. P. 12(b)(6)....................................................................................................................... 1, 2, 4

21 Fed. R. Civ. P. 15 ........................................................................................................................................ 6
22
23
24
25
26
27
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1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION
3 Plaintiff brings this action alleging securities law violations in connection with his short-term
4 secondary market trades in the digital currency XRP for a two-week period in January 2018. The crux
5 of these claims is the false assertion that XRP is not a currency, but rather a security. In fact, as
6 recognized by the U.S. Departments of Justice and Treasury in 2015, XRP is a “convertible virtual
7 currency.” 1 It is correctly characterized as a currency under applicable law and, as such, need not be
8 registered as a security under federal and state securities regulations. 2 For purposes of resolving this
9 Rule 12(b)(6) motion, however, the Court does not need to confront whether the securities laws apply
10 because, even assuming they do, Plaintiff’s claims fail on the independent grounds set forth below.
11 First, Plaintiff’s federal securities claims (Counts 1 and 2) are barred by the three-year statute of
12 repose in the Securities Act, which requires that claims for the offer or sale of unregistered securities be
13 brought within three years from when the securities were first bona fide offered to the public. The
14 Complaint contains numerous allegations that Ripple offered or sold XRP to the public more than three
15 years before Plaintiff filed his Complaint. For example, Plaintiff alleges that “all” XRP was “created” in
16 2013, that Ripple publicly disclosed the amount of XRP “in circulation” by December 2014, and that
17 Defendants acknowledged having “sold XRP to the general public” before May 2015. Complaint
18 ¶¶ 2, 25–26. All of these dates are more than three years prior to Plaintiff’s filing of the Complaint in
19 2019. The Securities Act’s statute of repose was intended precisely to prohibit individuals like
20 Plaintiff—who allegedly bought and sold XRP in January 2018, after over five years of XRP being
21 offered to the public—from pursuing legal action. Plaintiff’s federal securities claims also fail because
22 he failed to plead that the XRP he bought was part of an “initial distribution” or that Defendants were
23 the “sellers” of his XRP. To the contrary, Plaintiff allegedly bought XRP on the secondary market, from
24
1
Declaration of Kathleen Hartnett (“Hartnett Decl.”) Ex. A (Statement of Facts ¶ 17 from the federal
25 government’s May 2015 settlement with Ripple and XRP II) (cited in Complaint ¶ 2 & n.2; see also id.
¶¶ 25, 112).
26 2 The Complaint repeatedly refers to April 2019 guidance issued by staff of the Securities and Exchange
Commission about determining whether digital assets are securities, but fails to acknowledge that the
27 guidance expressly states it is “not a rule, regulation, or statement of the Commission” and “is not
binding” on the Commission or otherwise. https://www.sec.gov/news/public-statement/statement-
28 framework-investment-contract-analysis-digital-assets (cited in Complaint ¶ 10 & n.6).
1
1 an unidentified seller (of which there are allegedly thousands) on an unidentified exchange.
2 Second, Plaintiff’s California Corporations Code claims (Counts 3–5) fail for many similar
3 reasons. Plaintiff failed to plead (and cannot, given his unspecified secondary market transactions) the
4 required elements of an “issuer transaction,” privity with Defendants, XRP offers or sales in California,
5 or any statements by Defendants made in connection with Plaintiff’s XRP purchases. Plaintiff’s
6 misrepresentation claim also fails because he has not sufficiently pled any actionable misrepresentation
7 under Rule 9(b). Notably, Plaintiff often adopts Defendants’ statements as true, and to the extent he
8 disagrees with them, they are demonstrably true based on Plaintiff’s own Complaint or pertain to matters
9 of opinion.
10 Third, Plaintiff’s California claims under the False Advertising Law (“FAL”) and the Unfair
11 Competition Law (“UCL”) are barred under the Bowen doctrine, which provides that the FAL and UCL
12 do “not apply to securities transactions,” as Plaintiff here alleges. See Bowen v. Ziasun Tech., 116 Cal.
13 App. 4th 777, 788 (2004). These claims also fail based on the state law “safe harbor” for claims that
14 would violate a federal statute of repose. Further, because both the FAL and UCL claims are premised
15 on alleged fraud, they must meet the Rule 9(b) standard, which they do not.
16 Because Plaintiff fails to state a claim on all counts, and because the pleading failures are
17 incurable, the Complaint should be dismissed with prejudice pursuant to Rule 12(b)(6).
18 II. STATEMENT OF ISSUES TO BE DECIDED

19 A. Whether Plaintiff’s federal securities claims (Counts 1 and 2) must be dismissed because
20 (1) the Securities Act’s three-year statute of repose period terminated years before Plaintiff filed the
21 Complaint; and/or (2) Plaintiff fails to plausibly allege that he bought XRP as part of an “initial
22 distribution” or that Defendants were the “sellers” of the XRP he bought.
23 B. Whether Plaintiff’s California Corporations Code claims for unqualified securities

24 (Counts 3 and 5) must be dismissed because Plaintiff fails to plausibly allege (1) an “issuer transaction,”
25 (2) privity with Defendants, or (3) that Defendants offered or sold XRP to Plaintiff in California.
26 C. Whether Plaintiff’s misrepresentation claim (Count 4) must be dismissed because

27 Plaintiff fails to plausibly allege (1) privity with Defendants, (2) XRP purchases in California, (3) an
28 untrue material statement made in connection with his XRP purchases, or (4) an untrue material
2
1 statement compliant with Rule 9(b).
2 D. Whether Plaintiff’s claims for liability under the FAL and UCL (Counts 6 and 7) must be
3 dismissed because they (1) as alleged, relate to “securities transactions,” (2) fall within those statutes’
4 safe harbor due to the federal Securities Act’s three-year statute of repose, or (3) are insufficiently pled.
5 III. FACTUAL BACKGROUND

6 A. Defendants
7 Ripple is a company headquartered in San Francisco that provides financial institutions with
8 digital platforms for processing and sending instant, reliable, and cost-effective cross-border payments.
9 Complaint ¶¶ 14, 56, 102. XRP II is a subsidiary of Ripple, also headquartered in San Francisco. Id.
10 ¶ 15. Bradley Garlinghouse is Ripple’s CEO. Id. ¶ 16.
11 B. XRP and the XRP Ledger

12 Like Bitcoin and Ethereum, XRP is a virtual currency. Id. ¶ 2. The XRP Ledger is built on
13 open-source blockchain technology, and XRP is the native cryptocurrency to the XRP Ledger. Id.
14 ¶ 108. 3 Unlike other cryptocurrencies, which use a resource-draining process of “mining,” all 100
15 billion XRP were created in 2013 and “fully generated prior to its distribution.” Id. ¶ 2. Financial
16 institutions can use XRP to “source liquidity for payments into and out of emerging markets,” id. ¶ 45,
17 or for “real-time cross-border payments,” id. ¶ 102. As of June 2015, Ripple held about 67 billion XRP,
18 while others owned the remaining 33 billion. Id. ¶ 26. 4
19 In May 2015, the federal Departments of Treasury and Justice publicly concluded that XRP is a
20 “convertible virtual currency.” Hartnett Decl. Ex. A (cited in Complaint ¶ 2 & n.2; see also id. ¶¶ 25,
21 112); see supra n.1. This is consistent with the CFTC’s position that virtual currency is a commodity.
22 See supra n.3. Nonetheless, Plaintiff alleges that XRP is a “security” under federal and state law,
23 Complaint ¶¶ 121–159, and that Defendants have offered and sold XRP despite its non-registration with
3
24 As one court explained (in determining that “virtual currency may be regulated by the CFTC
[Commodity Futures Trading Commission] as a commodity”), virtual currencies are “stored
25 electronically in ‘digital wallets,’ and exchanged over the internet through a direct peer-to-peer system.
They are often described as ‘cryptocurrencies’ because they use ‘cryptographic protocols to secure
26 transactions . . . recorded on publicly available decentralized ledgers,’ called ‘blockchains.’” CFTC v.
McDonnell, 287 F. Supp. 3d 213, 217, 218 (E.D.N.Y. 2018) (quoting Brief of the CFTC).
27 4
As of September 1, 2019, others now hold approximately 43 billion XRP, and approximately 50 billion
XRP are inaccessible to Ripple until released from escrow. See https://www.ripple.com/xrp/market-
28 performance.
3
1 securities authorities, id. ¶¶ 1, 7.
2 C. XRP Sales, Including Plaintiff’s Alleged Purchases

3 Plaintiff alleges that “Defendants sell XRP wholesale to larger investors and also sell significant
4 quantities of XRP directly to the general public on cryptocurrency exchanges.” Id. ¶ 30. Specifically,
5 he alleges that XRP can be purchased or traded on more than 50 third-party virtual currency exchanges
6 worldwide. Id. ¶ 45. 5 These exchanges are secondary markets, where XRP can be sold not only by
7 Defendants, but also by other XRP holders who collectively own billions of XRP, id. ¶ 26, “thousands”
8 of whom Plaintiff includes as putative class members who have purchased XRP, id. ¶¶ 160, 161. The
9 XRP global market is massive, with over $500 billion in trading over the last two years. 6
10 The Complaint asserts that Defendants “sold XRP to the general public” before the May 2015
11 federal government settlement. Complaint ¶ 25. The government’s Statement of Facts for that
12 settlement states that XRP was sold to third parties as early as March 2013 by Ripple and as early as
13 August 2013 by XRP II (which “replaced Ripple Labs as a seller of XRP”). Hartnett Decl. Ex. A; see
14 supra n.1. Likewise, Plaintiff’s motion to be appointed lead plaintiff in this action asserted a “never-
15 ending initial coin offering (ICO)” since XRP was generated in 2013. Dkt. 45 at 2.
16 Plaintiff, “a resident of St. Petersburg, Florida,” claims to have bought and sold approximately
17 130,000 XRP between January 1 and 17, 2018, using other cryptocurrency. Complaint ¶ 13. 7 He does
18 not allege which exchanges he used or that he purchased XRP from any particular Defendant. Id. He
19 alleges, without specificity, that he was “motivated” to purchase XRP due to “the promotional activities
20 of Defendants described herein” and that he “saw and relied on Defendants’ repeated representations
21 that adoption of XRP by financial institutions and banks would drive demand for XRP.” Id.
22 IV. STANDARD OF REVIEW

23 “A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff
24 fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal
25 5
As of the filing of this Motion, XRP “is now listed on over 130 exchanges worldwide.” Q2 2019 XRP
26 Markets Report, https://www.ripple.com/insights/q2-2019-xrp-markets-report/ (cited in Complaint ¶ 31).
6
See “Total XRP volume (dollar in billions)” in the XRP Markets Reports cited in Complaint ¶¶ 31–39.
27 7 Plaintiff’s Certification in connection with his motion to be appointed lead plaintiff in this action
indicates that his short-term buying and selling of XRP in fact began on January 3 and that he continued
28 to buy XRP after he started selling it, suggesting an effort to make a quick profit. Dkt. 45-1 at 6–8.
4
1 theory.” Torion v. JPMorgan Chase Bank., Nat’l Assoc., 2017 WL 2986250, at *3 (N.D. Cal. July 13,
2 2017). The court need not accept as true “allegations that are merely conclusory, unwarranted
3 deductions of fact, or unreasonable inferences.” Muehlenberg v. Experian Info. Solutions, Inc., 2017
4 WL 6622837, at *2 (N.D. Cal. Dec. 28, 2017) (quoting In re Gilead Scis. Sec. Litig., 536 F.3d 1049,
5 1055 (9th Cir. 2008)). Likewise, “[l]egally conclusory statements, not supported by actual factual
6 allegations, need not be accepted by this court.” Torion, 2017 WL 2986250 at *3 (citing Ashcroft v.
7 Iqbal, 556 U.S. 662, 678–79 (2009)). “A claim has facial plausibility when the plaintiff pleads factual
8 content that allows the court to draw the reasonable inference that the defendant is liable for the
9 misconduct alleged.” Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
10 Under Rule 9(b), allegations of fraud must be “specific enough to give defendants notice of the
11 particular misconduct . . . so that they can defend against the charge and not just deny that they have
12 done anything wrong.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (alteration
13 in original) (internal quotation marks omitted). A party alleging fraud must set forth “the who, what,
14 when, where, and how” of the fraud. Id.
15 V. PLAINTIFF’S FEDERAL SECURITIES CLAIMS ARE BARRED BY THE STATUTE

OF REPOSE AND FAIL TO STATE A CLAIM (Counts 1, 2)
16
17 Plaintiff’s federal Securities Act claims for the unregistered sale of securities (Counts 1 and 2)
18 must be dismissed for three independent reasons. First, these claims are barred by the Act’s statute of
19 repose, which requires claims to be brought within three years of the first offering. Plaintiff’s own
20 Complaint alleges that Defendants offered and sold XRP to the public more than three years before he
21 filed the Complaint. Second, Plaintiff has not plausibly alleged that he purchased XRP in an “initial
22 distribution” (as opposed to on the secondary market). Third, Plaintiff has not plausibly alleged that any
23 Defendant was the “seller” of the XRP he purchased. Dismissal is therefore required.
24 A. Plaintiff’s Securities Act Claims Are Barred By The Act’s Statute Of Repose
25 Plaintiff raised his federal securities claims for the first time when he filed the Complaint on
26 August 5, 2019. Thus, to overcome the Act’s three-year statute of repose, Plaintiff must allege that XRP
27 was first offered for sale to the public after August 5, 2016—i.e., within three years of his filing.
28 Plaintiff’s own allegations repeatedly state that Ripple was selling XRP to the public well before August
5
1 2016, requiring dismissal with prejudice of the federal claims on statute of repose grounds. 8
2 1. Section 13’s “First-Offered” Rule Bars Any Action Brought More Than
Three Years After A Security’s First Public Offering
3
4 Section 13 of the Securities Act contains a three-year statute of repose. See Cal. Pub. Emp. Ret.
5 Sys. v. ANZ Sec., Inc., 137 S. Ct. 2042, 2049 (2017). Specifically, the statute states that “in no event”
6 shall an action under Section 12(a)(1) (the basis for Plaintiff’s federal claims) be brought “more than
7 three years after the security was bona fide offered to the public.” 15 U.S.C. § 77m. Section 13
8 “admits of no exception and on its face creates a bar against future liability.” ANZ Sec., 137 S. Ct. at
9 2049. “The 3-year time bar in § 13 reflects the legislative objective to give a defendant a complete
10 defense to any suit after a certain period.” Id. Plaintiffs must allege facts to show compliance with
11 Section 13. See Toombs v. Leone, 777 F.2d 465, 469 (9th Cir. 1985).
12 Under the “first-offered” rule, “the three-year [statute of repose] period begins when the security
13 is first bona fide offered.” P. Stolz Fam. P’ship, L.P. v. Daum, 355 F.3d 92, 100 (2d Cir. 2004)
14 (emphasis in original); see, e.g., McCormick v. Indep. Life & Annuity Co., 794 F.3d 817, 820 (7th Cir.
15 2015) (“A claim under § 12 arises when the security is first offered to the public, 15 U.S.C. § 77m, and a
16 statute of repose sets three years as the outer limit for suit.”); Mori v. Saito, 2013 WL 1736527, at *5
17 (S.D.N.Y. Apr. 19, 2013) (“It is well established that the three-year period of repose begins to run from
18 the first bona fide public offering of a security.”); In re Nat’l Mortgage Equity Corp. Mortgage Pool
19 Certificates Sec. Litig., 636 F. Supp. 1138, 1167–68 (C.D. Cal. 1986) (“the relevant offering under § 13
20 is the first offering of the security” (emphasis in original)); Taddeo v. Am. Invsco Corp., 2012 WL
21 1947897 at *2 (D. Nev. May 30, 2012) (statute of repose runs from first offering to the public). 9
22 8
Statutes of repose cannot be disturbed by attempts to relate back under Federal Rule of Civil Procedure
15. See Miguel v. Country Funding Corp., 309 F.3d 1161, 1165 (9th Cir. 2002) (holding that the Rules
23 Enabling Act prohibits application of Rule 15(c) to a claim barred by a statute of repose); In re IndyMac
Mortgage-Backed Sec. Litig., 793 F. Supp. 2d 637, 642–43 (S.D.N.Y. 2011) (holding Rule 15 “may not
24 be construed to permit relation back” once Section 13’s statute of repose has run). However, even if the
relevant filing date for purposes of the statute of repose were July 3, 2018 (the filing date of Greenwald,
25 the first complaint alleging Securities Act claims in this consolidated action), Plaintiff’s claims are still
barred, as the Complaint makes clear XRP was “bona fide offered to the public” before July 3, 2015.
26 9
The “first-offered” rule not only results from the text and legislative history of Section 13, but also
furthers the purpose of the statute of repose: if courts interpreted the repose period to run from the last
27 offer, Section 13 would not provide the “easily ascertainable and certain date for the quieting of
litigation” that statutes of repose are intended to provide. Stolz, 355 F.3d at 104. This is particularly
28 important where, as here, allowing Plaintiff’s Securities Act claims to move forward would unsettle the
(cont'd)
6
1
2. Plaintiff’s Allegations Demonstrate That He Brought This Action More Than
2 Three Years After Defendants Allegedly First Offered XRP To The Public
3 Under the “first-offered” rule, the question is whether Plaintiff filed the Complaint—dated
4 August 5, 2019—within three years of when Defendants first offered XRP to the public. He did not.
5 The Complaint is replete with allegations that Defendants offered XRP to the public years before August
6 2016. For example:
7 • “[A]ll 100 billion of the XRP in existence were created out of thin air by Ripple Labs at its
inception in 2013 . . . Defendants have since earned massive profits by selling XRP to the
8 general public . . .” Complaint ¶¶ 2, 4.
9 • “For example, in 2014, Ripple publicly stated on its www.ripplelabs.com/xrp-distribution/

website that ‘we will engage in distribution strategies that we expect will result in a stable or
10 strengthening XRP exchange rate against other cryptocurrencies.’” Id. ¶ 5.
• The Section of the Complaint titled “XRP’s Genesis and Public Offerings” references activities
11 between 2013 and 2015. Id. ¶¶ 22–27 (including section heading at page 7, line 12).
12 • “Ripple’s own wiki states that ‘Ripple Labs sells XRP to fund operations and promote the
network. This allows Ripple Labs to have a spectacularly skilled team to develop and promote
13 the Ripple protocol and network.’” Id. ¶ 24. This wiki page, upon which the Complaint
repeatedly relies, was last modified on July 12, 2014, well outside the three-year repose period.
14 Hartnett Decl. Ex. B at 3 (cited in Complaint ¶ 24 & n.7, ¶ 130 & n.91, ¶ 145 & n.99). 10
15 • “In May 2015, regulatory authorities in the United States fined Ripple and XRP II $700,000 for
violating the Bank Secrecy Act by selling XRP without obtaining the required authorization. As
16 part of that settlement, Defendants acknowledged that they had sold XRP to the general public
and agreed to a number of remedial measures, including registration with FinCEN.” Id. ¶ 25.
17
• “From December 2014 to July 2015, Ripple Labs disclosed on its website the amount of XRP it
18 held and the amount in circulation. The disclosure for June 30, 2015 stated that Ripple Labs held
approximately 67.51 billion XRP, more than double the approximately 32.49 billion XRP held
19 by all others.” Id. ¶ 26 (emphasis in original).
• “Ripple’s Project Manager for Risk and Compliance, Rebecca Schwartz, conceded this in a May
20 14, 2015 affidavit, stating: ‘The 9 billion XRP initially retained by Mr. McCaleb is included in
the roughly 32 billion XRP that is available to the market.’” Id. ¶ 27.
21
• “In May 2015, US regulatory authorities in the United States fined Ripple and XRP II $700,000
22 for ‘willfully’ violating the Bank Secrecy Act by selling XRP without obtaining the required
authorization.” Id. ¶ 112.
23
________________________
24 (cont'd from previous page)
expectations of thousands of market participants who for years understood Section 13’s three-year
25 period to have expired. Moreover, running the repose period from the end of a security’s offering would
“introduce[] equitable tolling where it has no legitimate place.” Id. at 104 n.8; see also ANZ, 137 S. Ct.
26 at 2052 (explaining that the “text, purpose, structure, and history of [Section 13] all disclose the
congressional purpose to offer defendants full and final security after three years”).
27 10 Plaintiff repeatedly cites to Ripple’s wiki in the Complaint. Therefore, the wiki is incorporated by
reference and this Court may consider it—including the “last modified” date stamp—in resolving this
28 Motion. See Request for Judicial Notice (concurrently filed with this Motion).
7
1 The May 2015 federal government settlement with Ripple and XRP II in which “Defendants
2 acknowledged that they had sold XRP to the general public,” id. ¶ 25, further states:
3 • “As of 2015, XRP is the second-largest cryptocurrency by market capitalization, after Bitcoin.”
Hartnett Decl. Ex A ¶ 3.
4
• “From at least March 6, 2013 through April 29, 2013, Ripple Labs sold convertible virtual
5 currency known as ‘XRP.’” Id. ¶ 17.
6 • “Throughout the month of April 2013, Ripple Labs effectuated multiple sales of XRP currency
totaling over approximately $1.3 million U.S. dollars.” Id. ¶ 20.
7
• “XRP II sold XRP currency in exchange for fiat currency in much the same way that Ripple
8 Labs had previously done from March through April 2013. In other words, XRP II replaced
Ripple Labs as a seller of XRP.” Id. at ¶ 22.
9 • “By on or about August 4, 2013, XRP II was engaged in the sale of XRP currency to third-party
entities.” Id. at ¶ 23. 11
10
11 Thus, under Plaintiff’s own allegations, Defendants offered XRP to the public throughout 2013
12 through 2015. Accordingly, the three-year statute of repose expired as of 2016 (three years after the
13 sales cited in the May 2015 settlement) and in no case later than May 2018 (three years after the May
14 2015 settlement agreement in which “Defendants acknowledged that they had sold XRP to the general
15 public,” Complaint ¶ 25). The Securities Act claims in the Complaint, filed August 5, 2019, are
16 therefore untimely and barred by the statute of repose. 12
17 3. Plaintiff’s Effort to Plead Around Section 13 Fails

18 In an apparent attempt to avoid the statute of repose, Plaintiff now pleads that Defendants made
19 “numerous offerings” of XRP. Complaint ¶¶ 4, 94. Notably, his allegation of “numerous offerings” is
20 in direct conflict with prior representations Plaintiff and his counsel have made to this Court. In his
21 motion to be appointed lead plaintiff in this action, Plaintiff alleged that Defendants sold “XRP tokens to
22 the general public in a never-ending initial coin offering”—i.e., a single “offering” since XRP was
23 created in 2013. Dkt. 45 at 2. Plaintiff’s current counsel likewise filed a separate action in May 2018
24 (on behalf of a different plaintiff), alleging that “in 2013, defendants began selling XRP to the general
25
11
26 As explained above, see supra n.1, and in the accompanying Request for Judicial Notice, the May
2015 settlement documents are properly considered by the Court on this Motion to Dismiss.
27 12 Even assuming that the Complaint relates back to the first complaint in this consolidated action raising
a federal securities claim, see supra n.8, that complaint (Greenwald) was filed in July 2018—more than
28 three years after the public sales of XRP in 2013–2015 admitted by the Complaint.
8
1 public and wholesale to larger investors in a ‘never ending ICO’—initial coin offering.” 13
2 In any event, Plaintiff’s “separate offering” theory fails to overcome the statute of repose as a
3 legal matter. First, the statute of repose begins to run “when the security [is] bona fide offered to the
4 public.” 15 U.S.C. § 77m (emphasis added). It contains no “multiple offerings” exception. See P.
5 Stolz, 355 F.3d at 102–03 (“a statute of repose begins to run without interruption once the necessary
6 triggering event has occurred”). As the Second Circuit observed in P. Stolz, the statute of repose creates
7 “potential immunity for later offerings” of the same security. Id. at 106 (emphasis added).
8 Second, Plaintiff’s own allegations belie his conclusory assertion of “separate offerings.”
9 Plaintiff does not and cannot allege that the XRP sold in 2013 are any different than the XRP sold today;
10 to the contrary, he alleges that all XRP was created in 2013 and that Defendants’ offerings are
11 “indiscriminate.” Complaint ¶¶ 2, 157. “Slow offerings”—sales of the same security in one offering
12 over an extended period—are subject to the “first-offered” rule. Stolz, 355 F.3d at 101 (explaining the
13 effect of the “first-offered” rule on slow offerings). Nor does Ripple’s use of escrow—which limits the
14 amount of XRP available to Ripple each month, including for sale—transform the sale of the same XRP
15 over time into “separate offering[s].” Complaint ¶ 94. Plaintiff’s assertion about the effect of escrow is
16 a legal conclusion that need not be accepted as true. Lewis v. City and Cty. of San Francisco, 2012 WL
17 909801, at *1 (N.D. Cal. Mar. 16, 2012) (“the tenet that a court must accept as true all of the allegations
18 contained in the complaint is inapplicable to legal conclusions” (quoting Iqbal, 556 U.S. at 678)).
19 Notably, there is no inequity in this result (although that is not part of the required analysis). By
20 Plaintiff’s own allegations, XRP has been available to the public since 2013. Plaintiff acknowledges
21 that since that time, billions of XRP have changed hands among “thousands” of purchasers on more than
22 fifty virtual currency exchanges worldwide. See Complaint ¶¶ 4, 22, 26−27, 30, 45, 84, 94, 128, 161.
23 The purpose of a statute of repose “is to allow more certainty and reliability,” which “are a necessity in a
24 marketplace.” ANZ, 137 S. Ct. at 2055. Here, the statute of repose allows the marketplace and
25 Defendants to rely on the fact that no claim was brought alleging XRP is a security until well over three
26 13
Coffey v. Ripple Labs Inc., 333 F. Supp. 3d 952, 955 (N.D. Cal. 2018) (citing Coffee Complaint ¶¶ 22,
26). The “never-ending ICO” allegations were also included in other complaints underlying this
27 consolidated action. See Dkt. 2-1, Ex. B at ECF p. 45 (Greenwald Complaint ¶ 38) (“From 2013 to the
present, Defendants and their affiliates have been engaged in an ongoing scheme to sell XRP to the
28 general public.”); Dkt. 2-1, Ex. C at ECF p. 66 (Zakinov Complaint ¶ 23) (alleging “never ending ICO”).
9
1 years after XRP was first publicly offered. Were Plaintiff allowed to belatedly challenge the
2 classification of XRP, it would not only threaten to eliminate XRP’s utility as a currency, but it would
3 upend and threaten to destroy the established XRP market more broadly—a market involving over $500
4 billion in trading over the last two years, see supra Section III.C—potentially wiping out the value held
5 by the alleged thousands of individual XRP holders around the world (many of whom no doubt disagree
6 with Plaintiff’s claim that XRP is a security). 14 By contrast, when Plaintiff bought and sold XRP during
7 a two-week window in January 2018 at the height of the market, Complaint ¶ 13, he had every reason to
8 know that XRP was not registered as a security and had been sold since 2013 without being subject to
9 federal or state securities laws. See Meadows v. Pac. Inland Sec. Corp., 36 F. Supp. 2d 1240, 1251
10 (S.D. Cal. 1999) (“a reasonable investor is going to check whether or not the security he has purchased
11 has been registered”); cf. United Hous. Found., Inc. v. Forman, 421 U.S. 837, 851 (1975) (purchasers
12 were not misled “into believing that the federal securities laws governed their purchase”).
13 In sum, Plaintiff’s federal securities claims are barred by the statute of repose.
14 B. Plaintiff’s Securities Act Claims Fail Because He Does Not Plausibly Allege That He
Purchased XRP In An “Initial Distribution”
15
16 To state a claim under Section 12(a)(1), a plaintiff must allege that he purchased the alleged
17 security as part of an “initial distribution”—not on the secondary open market. See Gustafson v. Alloyd
18 Co., Inc., 513 U.S. 561, 571–72 (1995) (explaining that the Securities Act is addressed to “public
19 offerings,” namely “initial distributions of newly issued stock from corporate issuers” (internal quotation
20 marks and citation omitted)); id. at 600 n.4 (noting that there is “no dispute” that Section 12(a)(1) is
21 limited to public offerings) (Ginsburg, J., dissenting); United States v. Naftalin, 441 U.S. 768, 777–78
22 (1979) (explaining that the Securities Act is “primarily concerned with the regulation of new offerings”);
23 Varjabedian v. Emulex Corp., 888 F.3d 399, 403−04 (9th Cir. 2018) (explaining that the “general
24 purpose” of the Securities Act “is to regulate the initial distribution of securities by issuers to public
25 investors”).
26 Plaintiff does not allege that he purchased XRP in an “initial distribution,” as opposed to on the
27 14
Entertaining such a challenge after expiration of the statute of repose also would unfairly disrupt the
long-settled expectations of other XRP market participants, such as exchanges, market makers, custody
28 providers and others.
10
1 secondary market. He alleges that Defendants sell XRP in two ways: “Defendants sell XRP wholesale
2 to larger investors and also sell significant quantities of XRP directly to the general public on
3 cryptocurrency exchanges.” Complaint ¶ 30; see id. ¶ 156. Plaintiff does not plead that he is a “larger
4 investor” who made a “wholesale” transaction, but instead that he was part of the “general public” who
5 purchased XRP, id. ¶ 209, through transactions in a two-week period in January 2018, id. ¶ 13. 15 The
6 necessary inference is that he bought and sold XRP through a secondary trading exchange. Id. ¶ 13. 16
7 Countless other XRP holders in addition to Defendants (including Plaintiff, see id.) sell XRP on
8 exchanges, making it impossible to plausibly conclude that Plaintiff purchased an initial distribution of
9 XRP from Defendants. In the quarter of Plaintiff’s alleged purchases, Ripple’s alleged exchange sales
10 of XRP were only $151.1 million (or 0.095 percent) of the “$160.0 billion traded globally in XRP.”
11 Hartnett Decl. Ex. C (full market report cited in Complaint ¶ 36 & n.16). Plaintiff admits that billions of
12 “fungible” XRP are in active circulation, and “thousands” of persons have purchased and sold XRP
13 through “over 50 exchanges.” Id. ¶¶ 4, 22, 26–27, 30, 45, 84, 94, 128, 145, 161.
14 A complaint must allege “factual content that allows the court to draw the reasonable inference
15 that the defendant is liable for the misconduct alleged.” Iqbal, 566 U.S. at 678. Plaintiff failed to do so,
16 instead alleging only that in the financial quarter during which Plaintiff purchased his XRP, Ripple’s
17 XRP sales accounted for a miniscule portion of daily exchange sales. This is insufficient to enable the
18 Court to draw a “reasonable inference” that Plaintiff purchased his XRP directly from Defendants in an
19 “initial distribution.” See Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1064–65 (9th
20 Cir. 2008) (refusing to draw inference for plaintiff in the face of a more plausible explanation; the court
21 “is not required to indulge unwarranted inferences in order to save a complaint from dismissal”).
22 C. Plaintiff’s Securities Act Claims Fail Because He Does Not Plausibly Allege That He
Purchased XRP From Any Defendant
23
24 Section 12(a)(1) of the Securities Act provides that “[a]ny person who offers or sells a security in
25 violation of” the Act’s registration requirements “shall be liable . . . to the person purchasing such
26
15
Plaintiff, who is an “individual” and not an institutional investor, alleges a purchase of approximately
27 130,000 XRP, id. ¶ 13—by volume, 0.0001 percent of XRP in existence.
16
This is confirmed by Plaintiff’s certification submitted in conjunction with his motion to serve as lead
28 plaintiff, which lists an array of small-volume transactions. See Dkt. 45-1 at 6−8.
11
1 security from him.” 15 U.S.C. § 77l(a)(1). This provision defines the class of “sellers” who may be
2 liable under Section 12(a)(1). See Pinter v. Dahl, 486 U.S. 622, 641–42 (1988). The Supreme Court
3 interprets Section 12(a)(1) narrowly. See id. at 644 n.21. A “seller” is a person who either (1) passes
4 title of the security to the buyer, or (2) solicits the purchase with a self-interested financial motive. Id. at
5 647. The Complaint fails to allege either with respect to any Defendant, requiring dismissal of
6 Plaintiff’s Securities Act claims.
7 1. Plaintiff Does Not Allege That Any Defendants Passed Title To Him
8 The Complaint does not allege that any specific Defendant passed title of XRP to Plaintiff.
9 Instead, Plaintiff alleges in conclusory fashion that he “purchased XRP securities from Defendants.”
10 Complaint ¶¶ 172, 187. As this Court has noted, “a mere assertion that defendants are . . . sellers is a
11 legal conclusion and therefore insufficient to withstand a motion to dismiss.” In re Bare Escentuals,
12 Inc. Sec. Litig., 745 F. Supp. 2d 1052, 1073 (N.D. Cal. 2010) (Hamilton, J.) (internal quotation marks
13 omitted). Plaintiff’s approach is nearly identical to that rejected by In re Violin Memory Securities
14 Litigation, in which plaintiffs alleged that they “bought common stock . . . directly from [defendant] J.P.
15 Morgan.” 2014 WL 5525946, at *18 (N.D. Cal. Oct. 31, 2014). The court rejected that allegation as
16 insufficient, id., as it should here.
17 Nor has Plaintiff made factual allegations permitting an inference that Defendants passed him
18 title. The necessary inference from the Complaint is that Plaintiff purchased his XRP on an exchange,
19 see supra Section V.B, with title passing to Plaintiff from an unidentified exchange counterparty.
20 Plaintiff alleges no facts allowing the plausible inference that his counterparty was a Defendant (let
21 alone any specific one), rather than the exchange or another user. See In re Longfin Corp. Sec. Class
22 Action Litig., 2019 WL 1569792, at *7 (S.D.N.Y. Apr. 11, 2019) (concluding defendant was not a
23 “seller” to those purchasing securities from NASDAQ). As noted above, it is implausible at best that
24 Ripple was Plaintiff’s counterparty, as Ripple sold less than one tenth of one percent of XRP traded in
25 the relevant quarter. See supra Section V.B. In this respect, the instant case presents an even stronger
26 case for dismissal than Welgus v. TriNet Group, Inc., 2017 WL 6466264 (N.D. Cal. Dec. 18, 2017),
27 aff’d, 765 F. App’x 239 (9th Cir. 2019), in which the court rejected Plaintiff’s argument that it was
28 “undeniable” that the Defendant was the “seller” based on the sale of “2,250,000 shares in the IPO” (out
12
1 of 15 million) and “all 13,800,000 shares in the Secondary Offering,” because such allegations “do not
2 constitute facts that Plaintiff purchased his shares directly from [Defendant] as opposed to another seller
3 or intermediary.” Id. at *28.
4 Moreover, it is “implausible if not impossible” that all three Defendants sold Plaintiff XRP in a
5 single transaction. Garcia v. M-F Athletic Co., Inc., 2012 WL 531008, at *2 (E.D. Cal. Feb. 17, 2012)
6 (dismissing claim where plaintiff alleged that three defendants sold him defective product). The
7 Complaint is notably vague and contradictory as to the alleged role of each Defendant, in some places
8 alleging that “Defendants” collectively sold the XRP, id. ¶¶ 1, 4, 10, 25, 30, 53, 75, 127, and in others
9 that both Ripple and XRP II made “programmatic” XRP sales. See id. ¶ 31–39. Plaintiff’s allegation
10 that Mr. Garlinghouse allegedly “directed and/or authorized, directly or indirectly, the sale and
11 solicitation of XRP,” id. ¶ 16, provides no reason to believe that Plaintiff bought from Mr. Garlinghouse.
12 In short, the Complaint does not permit a “reasonable inference,” Iqbal, 566 U.S. at 678, that any
13 Defendant passed XRP title to Plaintiff. See, e.g., In re Harmonic, Inc., Sec. Litig., 2006 WL 3591148,
14 at *14 (N.D. Cal. Dec. 11, 2006) (Hamilton, J.) (holding defendants were not “sellers” where “Plaintiffs
15 do not allege that the individual defendants passed title to any securities”).
16 2. Plaintiff Does Not Allege That Any Defendant Solicited His Purchases
17 Plaintiff also fails to allege that Defendants solicited any purchase from him. To allege that a
18 defendant is a “seller by solicitation,” a plaintiff must “plead active participation in the solicitation of the
19 immediate sale, a direct relationship between the purchaser and the defendant.” Maine State Ret. Sys. v.
20 Countrywide Fin. Corp., 2011 WL 4389689, at *9 (C.D. Cal. May 5, 2011). “Being merely a
21 ‘substantial factor’ in causing the sale of unregistered securities is not sufficient in itself to render a
22 defendant liable under §12(1).” Pinter, 486 U.S. at 654. “Plaintiffs must include very specific
23 allegations of solicitation, including direct communication with Plaintiffs.” Maine State, 2011 WL
24 4389689, at *10; see also Rosenzweig v. Azurix Corp., 332 F.3d 854, 871 (5th Cir. 2003) (“To count as
25 ‘solicitation,’ the seller must, at a minimum, directly communicate with the buyer.”); In re Countrywide
26 Fin. Corp. Mortgage-Backed Sec. Litig., 2012 WL 1322884, at *5 (C.D. Cal. Apr. 16, 2012) (dismissing
27 Section 12 claim alleging defendants “were involved in the process,” but not that “they had any direct
28 contact with [plaintiff]”). “Generally, issuers . . . are not sellers within the meaning of Section 12 unless
13
1 they actively participate in the negotiations with the plaintiff/purchaser.” Violin, 2014 WL 5525946, at
2 *18.
3 Plaintiff does not allege any direct relationship or direct communication with any Defendant, a
4 deficiency fatal to his claim that he purchased XRP from Defendants based on a solicitation theory.
5 Instead, Plaintiff alleges that Ripple “aggressively markets” XRP, Complaint ¶ 42, and that Ripple sells
6 XRP “indiscriminate[ly] . . . to the public at large where the persons or investors being solicited are
7 selected at random, rather than specifically or individually targeted,” id. ¶ 157. Plaintiff also alleges that
8 (i) Ripple’s website refers to virtual currency exchanges where XRP can be purchased; (ii) various
9 Ripple employees have tweeted about XRP; (iii) Ripple hosted a conference “to generate interest in
10 XRP”; (iv) Mr. Garlinghouse gave an interview describing his ownership of XRP; (v) Ripple attempted
11 to pay two cryptocurrency exchanges to list XRP; and (vi) articles have been written about Ripple and/or
12 XRP. Id. ¶¶ 42–83. However, Plaintiff does not allege that any Defendant directly communicated with
13 him to solicit his purchase of XRP, as Section 12(a)(1) requires. Merely alleging that certain Ripple
14 employees made positive public statements about XRP is not sufficient. See, e.g., PPM Am., Inc. v.
15 Marriott Corp., 853 F. Supp. 860, 874 (D. Md. 1994) (making public, non-targeted statements on which
16 plaintiff relied does not amount to solicitation under Pinter); Youngers v. Virtus Inv. Partners, Inc., 195
17 F. Supp. 3d 499, 522 (S.D.N.Y. 2016) (posting marketing materials on website did not constitute
18 solicitation); Maine State, 2011 WL 4389689, at *10 (allegation that defendant “‘promoted’ the sale of
19 securities is not sufficient”); XOMA Corp. Sec. Litig., 1990 WL 357807, at *8 (N.D. Cal. Dec. 27, 1991)
20 (allegations that defendants provided information to securities analysts, employed underwriters,

21 distributed prospectuses, and made contact with the investment community insufficient because “they do
22 not allege that any particular defendants solicited any particular plaintiff” (emphasis in original)).
23 D. Plaintiff Fails To State A Claim Under Section 15

24 Plaintiff’s claim for “control person” liability under Section 15 of the Securities Act also fails.
25 First, it is barred by Section 13’s statute of repose. See In re Countrywide Fin. Corp. Mortgage-Backed
26 Sec. Litig., 860 F. Supp. 2d 1062, 1072 (C.D. Cal. 2012) (dismissing Section 15 claim because Section
27 12 claim was time-barred under the statute of repose). Second, it fails because it is derivative of and
28 dependent on Plaintiff’s unsuccessful Section 12(a)(1) claim. To state a claim under Section 15, a
14
1 “plaintiff must establish (1) a primary violation of the pertinent federal securities laws, and (2) that
2 defendants exercised actual power or control over the primary violator.” Violin, 2014 WL 5525946, at
3 *19 (emphasis added). Where the plaintiff’s underlying Section 12 claim fails, as it does here, then the
4 control person claim based on “these same theories fails and must be dismissed.” Id.
5 VI. PLAINTIFF FAILS TO STATE ANY CLAIMS UNDER THE CALIFORNIA

CORPORATIONS CODE (Counts 3, 4, and 5)
6
A. Plaintiff’s “Unqualified” Securities Claims Fail (Counts 3 And 5, Cal. Corp. Code
7 §§ 25110, 25503, and 25504)
8 Section 25110 of the California Corporations Code makes it “unlawful for any person to offer or
9 sell in this state any security in an issuer transaction . . . unless such sale has been qualified” with the
10 state or is exempt from qualification. Section 25503 provides a civil cause of action to any person who
11 acquired an unqualified security directly from a seller. Section 25504 provides for “control person”
12 liability. Plaintiff’s state law securities claims should be dismissed for many similar reasons as his
13 federal securities claims: Plaintiff does not sufficiently allege that he purchased XRP (a) in an “issuer
14 transaction,” (b) directly from Defendants, or (c) “in this state.”
15 1. Plaintiff Fails To Allege An “Issuer Transaction”

16 Section 25110 is limited to “issuer transaction[s],” which are sales of securities “purchased from
17 the issuing corporation in a public offering.” Mirkin v. Wasserman, 5 Cal. 4th 1082, 1104 (1993).
18 These are distinct from “aftermarket transactions, i.e., resales of securities after they have been
19 purchased from the issuing corporation in a public offering.” Id. A transaction qualifies as an “issuer
20 transaction” only if the issuer receives at least a “portion of the purchase price.” Cal. Corp. Code
21 § 25011. Securities “purchased . . . on the open market” do not involve “issuer transactions” because
22 they do not require the purchaser to “deal face to face with the defendants, the price the purchasers [pay
23 does] not accrue directly to the defendants” and such transactions do not meet the definition of issuer
24 transactions. Viterbi v. Wasserman, 191 Cal. App. 4th 927, 938 (2011). As explained above with regard
25 to Plaintiff’s federal securities claims, Plaintiff fails to allege that he purchased XRP as part of an “issuer
26 transaction” as opposed to on the secondary market, requiring dismissal. See supra Section V.B.
27 2. Plaintiff Fails To Allege Privity With Defendants

28 Plaintiff’s unqualified securities claim also fails because strict privity between the plaintiff and
15
1 defendant is required, which Plaintiff has not pled. Bowden v. Robinson, 67 Cal. App. 3d 705, 712 (Ct.
2 App. 1977) (“Sections 25110 . . . and 25503 create liability affording the immediate purchaser several
3 specific remedies.” (emphasis added)); In re Am. Principals Holdings, Inc. Sec. Litig., 1987 WL 39746,
4 at *10 (S.D. Cal. July 9, 1987) (“Strict privity is required.”). Plaintiff fails to plausibly allege he
5 purchased XRP directly from any Defendant; his conclusory allegation that he “purchased XRP
6 securities from Defendants” is devoid of underlying facts and cannot support his claim. See supra
7 Section V.C. Plaintiff thus has no viable claim under Sections 25110 and 25503. Cf. Jackson v.
8 Fischer, 931 F. Supp. 2d 1049, 1063 (N.D. Cal. 2013) (Hamilton, J.) (dismissing claim when plaintiff
9 “fail[ed] to allege facts showing that she was in privity with” defendants).
10 3. Plaintiff Fails To Allege His XRP Transaction Occurred “In This State”
11 Plaintiff’s unqualified securities claim also fails because Section 25110 is limited to securities
12 offered or sold in California. Diamond Multimedia Sys., Inc. v. Superior Court, 19 Cal. 4th 1036, 1053
13 (1999). An offer or sale is made in California when (a) “an offer to sell is made in this state”; (b) “an
14 offer to buy is accepted in this state”; or (c) both the “security is delivered to the purchaser in this state”
15 and “both the seller and the purchaser are domiciled in this state.” Cal. Corp. Code § 25008(a). “That a
16 person is a citizen of a state is insufficient to leap to the conclusion that the sale of a security took place
17 in that state.” Siegal v. Gamble, 2016 WL 1085787, at *7 (N.D. Cal. Mar. 21, 2016).
18 Plaintiff failed to plausibly allege an offer or sale in California. Rather, Plaintiff makes the
19 highly generalized allegations that Defendants “engag[ed] in the conduct described above within
20 California,” Complaint ¶ 186, and “sold and offered to sell XRP, a security, in the State of California,”
21 id. ¶ 197. These conclusory allegations are insufficient to show an offer or sale to Plaintiff in California.
22 Siegal, 2016 WL 1085787, at *7 (“details” to show that the sale or offer took place in California are
23 “essential to state a claim for relief”). Plaintiff is a Florida resident who does not allege he was in
24 California when he purchased XRP. Id. ¶ 13. Plaintiff apparently purchased his XRP on an exchange,
25 see supra Section V.B, but he pleads no information about those transactions to connect them to
26 California. Nor does he plausibly allege that any Defendant made any offer to him in California.
27 Instead, Plaintiff attempts to rely on “marketing” allegations pertaining primarily to tweets, media
28 interviews, and content from Ripple’s website. Id. ¶¶ 42–97. None of the alleged “marketing”
16
1 constitutes an offer to sell XRP to Plaintiff. See Konik v. Cable, 2009 WL 10681970, at *4 (C.D. Cal.
2 Dec. 2, 2009) (“[A]n advertisement . . . is not an offer” unless it “invite[s] performance of a specific act
3 without further communication and leave[s] nothing for negotiation.” (emphasis in original)).
4 4. Control Person Liability Is Unavailable Absent A Primary Violation

5 Because Plaintiff’s unqualified securities claim fails, his control person liability claim also fails
6 and must be dismissed. Section 25504 extends liability only to persons who “directly or indirectly
7 control[] a person liable under Section . . . 25503.” Absent a viable claim of primary liability, the
8 related control person claim fails. See Jackson, 931 F. Supp. 2d at 1064 (Hamilton, J.).
9 B. Plaintiff’s Misrepresentation Claim Fails (Count 4)

10 Section 25401 of the California Corporations Code makes it “unlawful for any person to offer or
11 sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or
12 oral communication that includes an untrue statement of a material fact or omits to state a material fact
13 necessary to make the statements made, in the light of the circumstances under which the statements
14 were made, not misleading.” Section 25501 provides a claim “to the person who purchases a security
15 from . . . or sells a security to” a Section 25401 violator. Section 25504.1 extends liability to “person[s]
16 who materially assist[] in a violation of Section 25401 . . . with intent to deceive or defraud.”
17 Plaintiff’s misrepresentation claim fails for several reasons. As with the unqualified securities
18 claim, Plaintiff does not plausibly allege privity or that he purchased XRP “in this state.” In addition,
19 none of the alleged statements by Defendants was made in connection with Plaintiff’s purchase of XRP,
20 and none qualifies as an actionable misstatement under the heightened pleading standard of Rule
21 9(b). Finally, because Plaintiff fails to allege a primary violation, his material assistance claim fails.
22 1. Plaintiff Fails To Allege Privity Or An In-State Transaction

23 To bring a viable misrepresentation claim under Sections 25401 and 25501, Plaintiff must
24 plausibly allege both privity with Defendants and that he purchased a security in California. Apollo
25 Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 252–54 (2007) (“Section
26 25501 on its face requires privity between the plaintiff and the defendant.”); Diamond, 19 Cal. 4th at
27 1053. As discussed above, see supra Sections VII.A.2–3, the Complaint plausibly alleges neither.
28
17
1
2. Plaintiff Fails To Identify Any Statements Made By Defendants “In
2 Connection With” Plaintiff’s XRP Purchases
3 Plaintiff fails to allege, as he must, that any of the statements attributed to Defendants were in
4 any way related to his purchase of XRP. Section 25401 requires a sale “by means of” a “written or oral
5 communication” containing a misrepresentation and extends liability only to misrepresentations made
6 “in connection with the purchase or sale of securities.” Apollo, 158 Cal. App. 4th at 249 (emphasis
7 added). In other words, Plaintiff must plead that Defendants “made a false or misleading statement to
8 Plaintiff[] when negotiating” the sale of the alleged security. SIC Metals, Inc. v. Hyundai Steel Co.,
9 2018 WL 6842958, at *5 (C.D. Cal. Nov. 14, 2018) (emphasis added).
10 The Complaint is devoid of allegations that Defendants made any statements “in connection
11 with” Plaintiff’s XRP purchases. As explained above, see Section V.C.2, Defendants’ alleged
12 statements consist of tweets, Ripple’s website content, and media interviews excerpts. Complaint
13 ¶¶ 42–120. None of these alleged statements were directed at Plaintiff or made in the course of
14 “negotiating” with him; to the contrary, Plaintiff alleges that Defendants’ offerings “are indiscriminate
15 offerings to the public at large where the persons or investors being solicited are selected at random,
16 rather than specifically or individually targeted.” Id. ¶ 157. Moreover, most of the alleged statements
17 occurred either after or months before Plaintiff’s alleged purchase of XRP in January 2018, making it
18 impossible and/or implausible that the statements were made “in connection with” Plaintiff’s purchases.
19 See Complaint ¶¶ 44, 52, 54, 60–67, 69, 81, 85–88, 93, 96–97, 99–102, 117–18, 120; cf. Mauser v.
20 Marketbyte LLC, 2013 WL 12073832, at *12 (S.D. Cal. Jan. 4, 2013) (finding California securities
21 claims insufficiently pled where “[the alleged] communications were sent after his purchase of those
22 securities or months before his purchase date. Plaintiff’s purchases of these stocks therefore could not
23 have been made in connection with those communications.”).
24 3. Plaintiff Fails To Allege An Actionable Misstatement Under Rule 9(b)

25 Although the failings identified above are dispositive of the Section 25401 claim, Plaintiff also
26 fails to allege any actionable misrepresentation or omission under Rule 9(b), which requires a party who
27 alleges fraud to “state with particularity the circumstances constituting fraud.” See supra Section IV.
28 To begin with, the Complaint does not identify the specific statements on which Plaintiff bases
18
1 his Section 25401 claim. See Complaint ¶¶ 191–200. In fact, Plaintiff appears to adopt many of the
2 cited statements as true. E.g., id. ¶¶ 31–39 (describing Ripple’s quarterly sales of XRP). This alone
3 justifies dismissal. See Doan v. Singh, 2013 WL 3166338, at *10 (E.D. Cal. June 20, 2013) (dismissing
4 Section 25401 claim where plaintiff did not identify alleged misrepresentations). Plaintiff is also
5 required to “to inform each defendant separately of the allegations surrounding his alleged participation
6 in the fraud.” Swartz v. KPMG LLP, 476 F.3d 759, 765 (9th Cir. 2007) (“Rule 9(b) does not allow a
7 complaint to merely lump multiple defendants together, but requires plaintiffs to differentiate their
8 allegations when suing more than one defendant.” (internal quotation marks omitted)). But the
9 Complaint improperly lumps all Defendants together. See, e.g., Complaint ¶ 198. And Plaintiff
10 improperly relies on statements by Ripple employees, id. ¶¶ 48, 74, 99, 113–118, 120, without alleging
11 that they were authorized to speak on behalf of the company. Tarmann v. State Farm Mut. Auto. Ins.
12 Co., 2 Cal. App. 4th 153, 157 (1991) (“The requirement of specificity in a fraud action against a
13 corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent
14 representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was
15 said or written.”).
16 Further, none of the statements apparently targeted by Plaintiff is false, as can be determined
17 from the face of the Complaint. First, Plaintiff alleges that on June 30, 2015, Ripple disclosed on its
18 website that Ripple held approximately 67.5 billion XRP, while the remaining 32.5 billion was held by
19 “Others.” Complaint ¶ 26. He asserts that this statement “significantly overstates independent holdings
20 of XRP” because “Others” included the 20 billion XRP held by Ripple’s founders and an amount used
21 in “business development agreements that are still pending.” Id. Plaintiff has not identified, and cannot
22 identify, any “material fact” that Ripple misstated or omitted as relates to this representation. Greenberg
23 v. Sunrun, Inc., 233 F. Supp. 3d 764, 771–72 (N.D. Cal. 2017) (dismissing Section 12(a)(2) claim
24 because actionable omissions must “create an impression of a state of affairs that differs in a material
25 way from the one that actually exists”). To begin with, the XRP held individually by Ripple’s founders
26 were, by definition, not held by Ripple. Moreover, the statement at issue cited in the Complaint itself
27 discloses that the “Others” figure includes XRP tied up in “business development agreements that are
28 still pending.” Complaint ¶ 26. Finally, the very next paragraph concedes that Ripple also already had
19
1 publicly disclosed, prior to the challenged representation, that the “Others” figure includes XRP held by
2 founders. Id. at ¶ 27. Defendants had no obligation to repeatedly disclose publicly available
3 information. Rubke v. Capital Bancorp Ltd., 551 F.3d 115, 1162–63 (9th Cir. 2009) (holding it
4 “pointless and costly” to compel reprinting of public information).
5 Second, Plaintiff challenges a January 17, 2018 tweet from Mr. Garlinghouse, 17 which linked to
6 a CNBC article entitled “Ripple is sitting on close to $80 billion and could cash out hundreds of millions
7 per month—but it isn’t.” Complaint ¶ 52. Plaintiff alleges that this headline was false because Ripple
8 allegedly sold $167.7 million during the same quarter. Id. ¶ 53. But Plaintiff’s own allegations, which
9 incorporate the sales figure, demonstrate the statement’s truth: if Ripple sold $167.7 million over a
10 three-month quarter, its average monthly sales were $55.9 million—not “hundreds of millions per
11 month.” Thus, the statement “Ripple . . . could cash out hundreds of millions per month—but it isn’t” is
12 true and non-actionable. Moreover, while Plaintiff seeks to isolate the headline, the body of the article
13 describes how much XRP Ripple was selling each month. Hartnett Decl. Ex. D. No reasonable investor
14 would have been misled. See Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135
15 S. Ct. 1318, 1330 (2015) (“an investor reads each statement . . . in light of all its surrounding text”).
16 Third, Plaintiff challenges several tweets that allegedly “conflate” XRP with “Ripple Enterprise
17 Solutions” by failing to always specifically distinguish between the two. Complaint ¶¶ 55, 59, 62, 68.
18 But Plaintiff does not plausibly allege that failing to detail the distinction between XRP and Ripple’s
19 enterprise software creates the impression that they are the same. See Retail Wholesale & Dep’t Store
20 Union Local 338 Ret. Fund v. Hewlett-Packard Co., 845 F.3d 1268, 1275 (9th Cir. 2017) (a “statement
21 is misleading if it would give a reasonable investor the impression of a state of affairs that differs in a
22 material way from the one that actually exists”). This is particularly true because the distinction between
23 Ripple’s enterprise software and XRP was already publicly disclosed. See Complaint ¶¶ 56–58. Again,
24 Defendants had no obligation to repeatedly disclose publicly available information. Rubke, 551 F.3d at
25 1162–63 (holding it “pointless and costly” to compel reprinting of public information).
26
17
Plaintiff included this allegation under the heading “Defendants Market XRP to Drive Demand and
27 Increase Price.” Yet, notably, this tweet was made the day after Plaintiff’s last XRP purchase and on a
day when he sold his remaining XRP, see Complaint ¶ 19, indicating that Plaintiff’s own conduct is at
28 odds with the claimed effect of the cited statements.
20
1 Fourth, Plaintiff challenges statements “claiming that use of XRP by banks and financial
2 institutions will drive demand for XRP.” Complaint ¶ 75; see id. ¶¶ 61, 65–67, 70, 73. To be
3 misleading, however, an alleged statement must be “capable of objective verification”; “vague
4 statement[s] of optimism” not capable of objective verification are not actionable. Retail Wholesale,
5 845 F.3d at 1275. Here, the alleged misstatements were at most non-verifiable, vague statements of
6 optimism. See Mosco v. Motricity, Inc., 649 F. App’x 526, 529 (9th Cir. 2016) (describing positive
7 statements about a technology product as “forward-looking, too vague to be actionable, or constitute
8 puffery or fraud by hindsight”). Plaintiff does not identify any claim capable of being verifiably untrue.
9 Fifth, Plaintiff claims that Defendants were “the source” of rumors about a virtual currency
10 exchange, Coinbase, potentially listing XRP. Complaint ¶ 83. This allegation is entirely
11 unsubstantiated: Plaintiff does not identify a single statement by any Defendant that caused these alleged
12 rumors, let alone allege a material misstatement or omission. See Doan, 2013 WL 3166338, at *10.
13 Sixth, Plaintiff challenges statements “falsely claiming that XRP is not a security.” 18 Complaint
14 ¶¶ 95–97. Such statements (including in this brief) are non-actionable statements of Ripple’s long-held
15 legal position. See Irving Fireman’s Relief & Ret. Fund v. Uber Techs., Inc., 2018 WL 4181954, at *6–
16 7 (N.D. Cal. Aug. 31, 2018) (dismissing claims based on statements such as “We are legal
17 . . . According to the law” where no governmental official had found defendant’s programs unlawful). 19
18 Plaintiff cannot plausibly allege that Ripple does not believe that XRP is not a security—particularly in
19 light of the federal government’s May 2015 characterization of XRP as a currency. Plaintiff also does
20 not plead the sources, dates, and content of alleged statements by Mr. Garlinghouse. Complaint ¶ 97.
21 Finally, Plaintiff alleges that Ripple “now claims that it ‘didn’t create XRP; 100 billion XRP was
22
18
These statements were made months after Plaintiff’s last purchase and sale of XRP, Complaint ¶ 9,
23 95–97, and thus could not have been made “in connection with” his XRP transactions. Mauser, 2013
WL 12073832, at *12.
24 19 Specifically, XRP is not a “security” under Section 2(a)(1) of the Securities Act because it is not an
“investment contract.” See 15 U.S.C. § 77b(a)(1); SEC v. W.J. Howey Co., 328 U.S. 293, 298–99
25 (1946). Purchasing XRP is not an “investment” in Ripple; there is no common enterprise between
Ripple and XRP purchasers; there was no promise that Ripple would help generate profits for XRP
26 holders; and the XRP Ledger is decentralized. See Howey, 328 U.S. at 298–99. Moreover, because
XRP is a currency, it cannot, as a matter of law, also be a security. See 15 U.S.C. § 78c(a)(10). As
27 stated above, see supra Section I, because of the multiple, independent grounds for dismissing this
action, the Court need not resolve whether XRP is a security or currency for purposes of this Motion,
28 which assumes Plaintiff’s allegation that XRP is a security.
21
1 created before the company was formed,’” while it “previously admitted that it ‘is the creator of
2 Ripple.’” Complaint ¶ 146. To support this allegation, Plaintiff cites to third-party blog post, dated
3 November 25, 2018—nearly a year after Plaintiff bought and sold his XRP and more than six months
4 after the first complaint alleging Ripple sold an unregistered security was first filed. See id. ¶ 146 n.101.
5 These alleged statements are immaterial, and Plaintiff’s pleadings contain no details about who, when,
6 or where they were made, thus failing to satisfy Rule 9(b).
7 4. Plaintiff Cannot Sustain A Material Assistance Claim Under Section 25504.1

Because He Failed To Allege A Primary Violation Or Plead With
8 Particularity
9 The deficiencies with Plaintiff’s misrepresentation claim also require dismissal of his material
10 assistance claim against Ripple and Mr. Garlinghouse under Section 25504.1. Complaint ¶ 193. To
11 bring a viable Section 25504.1 claim, Plaintiff must “state an underlying violation of section 25401.”
12 SIC Metals, 2018 WL 6842958, at *5. As just explained, Plaintiff failed to do so.
13 Additionally, Plaintiff must plead material assistance with specificity under Rule 9(b). Calderon
14 v. Total Wealth Mgmt., Inc., 2018 WL 1621397, at *4 (S.D. Cal. Apr. 4, 2018). “[T]he complaint must
15 include allegations demonstrating how the defendant assisted in the act of selling or offering to sell
16 securities by means of false or misleading statements.” Siegal, 2016 WL 1085787, at *6 (emphasis
17 added). Courts dismiss Section 25504.1 claims when the plaintiff fails to allege direct communications
18 with the defendant. See AREI II Cases, 2016 Cal. App. 4th, 1004, 1018–19 (2013) (sustaining demurrer
19 because plaintiff had not alleged that defendant “had any communications whatsoever with plaintiffs”);
20 Calderon v. Total Wealth Mgmt., Inc., 2017 WL 6272096, at *7 (S.D. Cal. Jan. 19, 2017) (dismissing
21 claim where “[t]he only specific allegations . . . that [defendant] promoted sales are his appearance on a
22 radio show to provide tax advice”). Plaintiff quotes tweets and interview excerpts by Ripple and Mr.
23 Garlinghouse, see Complaint ¶¶ 52–53, 55, 59–68, 70, 75, 83, 95–97, 146, but fails to allege that these
24 statements were directed or sent to Plaintiff. Thus, Plaintiff fails to identify how Ripple or Mr.
25 Garlinghouse “assisted in the act of selling” XRP to him “by means of false or misleading statements.”
26 Siegal, 2016 WL 1085787, at *6.
27 Plaintiff also fails to plead sufficient facts to support a plausible inference that Defendants
28 intended to deceive or defraud. SIC Metals, Inc., 2018 WL 6842958, at *5. At minimum, this required
22
1 identifying which statements Ripple and Mr. Garlinghouse “knew to be false,” Siegal, 2016 WL
2 1085787, at *6, and alleging how they “intended to induce Plaintiff to rely on the representations known
3 to be misleading,” Kelter v. Forrest, 2008 WL 11342628, at *3 (C.D. Cal. July 2, 2008). While Plaintiff
4 conclusorily claims that Ripple and Mr. Garlinghouse acted with “intent to deceive or defraud,”
5 Complaint ¶ 193, Plaintiff alleges no facts to support this claim.
6 VII. PLAINTIFF’S CALIFORNIA CONSUMER PROTECTION CLAIMS MUST BE

DISMISSED (Counts 6, 7)
7
8 Plaintiff’s claims under California’s FAL and UCL fail and should be dismissed with prejudice.
9 First, the FAL and UCL “do[] not apply to securities transactions”—the transactions Plaintiff alleges.
10 See Bowen v. Ziasun Tech., 116 Cal. App. 4th 777, 788 (2004). Second, Section 13’s statute of repose,
11 see supra Section V.A, triggers the FAL and UCL’s safe harbor, which precludes liability where, as
12 here, Congress has “considered a situation and concluded no action should lie.” See Cel-Tech
13 Commc’ns, Inc. v. L.A. Cell. Tel. Co., 20 Cal. 4th 163, 182 (1999). Third, both claims are insufficiently
14 plead under Rule 9(b)’s heightened pleading standard.
15 A. Plaintiff’s Consumer Claims Fail Because They Relate To “Securities Transactions”

16 Plaintiff’s FAL and UCL claims relate to and depend on the alleged offer, purchase, and sale of
17 securities. Complaint ¶ 212 (FAL); id. ¶¶ 170, 178, 190, 196, 217, 219 (UCL). But California’s
18 consumer protection statutes “do[] not apply to securities transactions.” Bowen, 116 Cal. App. 4th at
19 788 (affirming summary judgment in favor of defendant on UCL claim relating to the sale of securities);
20 Kainos Labs., Inc. v. Beacon Diagnostics, Inc., 1998 WL 2016 2016634, at *17 (N.D. Cal. Sept. 14,
21 1998) (dismissing FAL and UCL claims premised on “securities transactions”). Courts in the Northern
22 District of California regularly apply Bowen to dismiss similar claims with prejudice. See Betz v.
23 Trainer Wortham & Co., 829 F. Supp. 2d 860, 866–67 (N.D. Cal. 2011) (“No court . . . has allowed
24 Section 17200 claims to proceed where, as here, the predicate acts are securities transactions.”); S.F.
25 Residence Club, Inc. v. Amado, 773 F. Supp. 2d 822, 833–34 (N.D. Cal. 2011) (dismissing UCL claim
26 because “plaintiffs’ theory unavoidably focuses on the purchase of securities, and Bowen is
27 determinative”); Mohebbi v. Khazen, 50 F. Supp. 3d 1234, 1259 (N.D. Cal. 2014) (dismissing UCL
28 claim predicated on state securities laws because “section 17200 does not permit claims based on
23
1 securities transactions”). Because Plaintiff clearly alleges XRP is a security, these claims cannot be
2 cured and must be dismissed with prejudice.
3 B. Plaintiff’s Consumer Claims Are Barred By The FAL And UCL’s Safe Harbor
4 Both the FAL and UCL contain a safe harbor that ensures that these consumer protection statutes
5 are not used to “override” legislative judgments. See Cel-Tech, 20 Cal. 4th at 182 (describing UCL’s
6 safe harbor); Pom Wonderful LLC v. Coca Cola Co., 2013 WL 543361, at *5 (C.D. Cal. Feb. 13, 2013)
7 (relying on safe harbor to grant summary judgment on FAL claim). The safe harbor applies whenever a
8 legislature has “considered a situation and concluded no action should lie.” Id. That is, where a statute
9 considers certain conduct and “actually ‘bar[s]’ the action,” Loeffler v. Target Corp., 58 Cal. 4th 1081,
10 1125 (2014), the safe harbor operates to preclude FAL and UCL claims predicated on the same conduct.
11 A plaintiff may not “plead around” an “absolute bar to relief simply by recasting the cause of action” as
12 one under California’s consumer protection statutes. See Cel-Tech., 20 Cal. 4th at 182.
13 Here, the federal Securities Act’s statute of repose categorically bars any action brought, as here,
14 more than three years after a security’s first offering. See supra Section V.A. It also triggers the FAL
15 and UCL safe harbor insofar as Plaintiff’s consumer causes of action depend upon his Securities Act
16 claims, because in this situation Congress “considered” and “concluded no action should lie.” Cel-
17 Tech., 20 Cal. 4th at 182. See, e.g., Complaint ¶¶ 212, 215, 218.
18 C. Plaintiff’s Consumer Protection Claims Are Insufficiently Pled Under Rule 9(b)
19 To the extent Plaintiff’s FAL and UCL claims are not barred by the foregoing limitations on
20 consumer protection actions, the claims allege false or misleading statements or other fraudulent
21 conduct, see, e.g., Complaint ¶¶ 210–211, 214, 217, 219–220, and are insufficiently pled under Rule
22 9(b). See supra Section IV. Rule 9(b)’s particularity requirement applies to each of the UCL’s three
23 prongs. See Hadley v. Kellogg Sales Company, 243 F. Supp. 3d 1074, 1094 (N.D. Cal. 2017).
24 The FAL and UCL claims are insufficiently pled in at least two ways. First, Plaintiff fails to
25 allege that any Defendant made a false or misleading statement. See Wolph v. Acer Am. Corp., 2009
26 WL 2969467, at *5 (N.D. Cal. Sept. 14. 2009) (dismissing UCL and FAL claims where plaintiffs failed
27 to allege misrepresentations with sufficient particularity under Rule 9(b)). Plaintiff alleges four
28 categories of purportedly “false” statements concerning “the genesis of XRP,” “the circulating supply of
24
1 XRP,” “the adoption of XRP,” and the “assertion that XRP is not a security.” Complaint ¶¶ 211, 217.
2 But none of these statements is alleged with particularity. See supra Section VI.B.3.
3 Second, plaintiffs “alleging claims under the FAL and UCL are required to plead and prove
4 actual reliance on the misrepresentations or omissions at issue.” Great Pac. Sec. v. Barclays Capital,
5 Inc., 743 Fed. App’x 780, 783 (9th Cir. 2018). Plaintiff alleges in conclusory terms that he “saw and
6 relied on Defendants’ repeated representations that the adoption of XRP by financial institutions and
7 banks would drive demand for XRP.” Complaint ¶¶ 13, 219. However, Plaintiff fails to allege when he
8 saw any alleged representations, such as whether he saw them before his purchase of XRP and relied on
9 those representations in making the purchase. See Hall v. Sea World Entm’t, Inc., 2015 WL 9659911, at
10 *4–5 (S.D. Cal. Dec. 23, 2015) (dismissing UCL and FAL claims where plaintiffs alleged misleading
11 statements were made in public, general sources, but failed to allege that they “actually saw or
12 read any advertising or statements made . . . prior to purchasing their tickets”). Finally, to the extent
13 Plaintiff claims reliance on non-actionable statements, his claim fails. See In re Sony Grand Wega
14 KDF-E A10/A20 Series Rear Projection HDTV Television Litig., 758 F. Supp. 2d 1077, 1089 (S.D. Cal.
15 2010) (dismissing UCL and FAL claims because reasonable consumers cannot rely on “[g]eneralized,
16 vague, and unspecified assertions”). 20
17 VIII. CONCLUSION
18 The Motion to Dismiss should be granted and the Complaint dismissed with prejudice. Leave to
19 amend should be denied because amendment would be futile. Lockheed Martin Corp. v. Network
20 Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999). As to the Securities Act claims, among other things,
21 repleading cannot change the date on which the instant action was filed, which is dispositive under the
22 statute of repose. As to the federal and state securities claims, among other things, Plaintiff’s secondary
23 market purchases cannot be part of an “initial distribution” or an “issuer transaction” nor can Plaintiff
24 plead facts to demonstrate that he purchased his XRP from Defendants. Similarly, Plaintiff cannot
25 disavow his allegations of a “securities” transaction, barring his consumer protection claims.
26
20
With respect to the UCL, Plaintiff also fails under the unlawful prong because there is no underlying
27 securities violation; under the fraudulent prong because there were no actionable misrepresentations (let
alone pled with particularity); and under the unfair prong because he alleges no unfairness beyond the
28 conduct that otherwise fails to state a claim.
25

2
3 By: /s/ Kathleen R. Hartnett

Telephone: (415) 293-6800
6
Facsimile: (415) 293-6899

New York, NY 10001
10
Telephone: (212) 446-2300
11 Facsimile: (212) 446-2350
12
919 Third Avenue
14
New York, NY 10022
15 Telephone: (212) 909-6000
Facsimile: (212) 909-6836
18 XRP II, LLC, and Bradley Garlinghouse
19
20
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26
Case 4:18-cv-06753-PJH Document 70-1 Filed 09/19/19 Page 1 of 4

3 Telephone: (415) 293-6800
Facsimile: (415) 293-6899
New York, NY 10001
7 Telephone: (212) 446-2300
Facsimile: (212) 446-2350
10 919 Third Avenue
New York, NY 10022
11 Telephone: (212) 909-6000
Facsimile: (212) 909-6836
14

17 OAKLAND DIVISION

19 REQUEST FOR JUDICIAL NOTICE OR
INCORPORATION BY REFERENCE IN
20 This Document Relates To: SUPPORT OF DEFENDANTS’ MOTION TO
All Actions DISMISS
21
Date: January 15, 2020
22 Time: 9:00 a.m.
Place: Courtroom 3
23 Judge: Hon. Phyllis J. Hamilton
24 Consolidated Complaint filed: August 5, 2019
25 [FILED CONCURRENTLY WITH
NOTICE OF MOTION AND MOTION TO
26 DISMISS, MEMORANDUM OF POINTS AND
AUTHORITIES; DECLARATION OF
27 KATHLEEN HARTNETT]
28
REQUEST FOR JUDICIAL NOTICE

1 Defendants Ripple Labs Inc. (“Ripple”), XRP II, LLC (“XRP II”), and Bradley Garlinghouse
2 (collectively, “Defendants”) request that the Court take judicial notice or incorporate by reference four
3 documents that are quoted and/or cited in Plaintiff’s Consolidated Complaint for Violations Of Federal
4 And California Law (“Complaint”).1
5 The first document is the Statement of Facts from the federal government’s May 2015 settlement
6 with Ripple and XRP II. Complaint ¶ 2 & n.2; see also id. ¶¶ 25, 112. A true and correct copy of the
7 Statement of Facts is attached as Exhibit A to the concurrently filed Declaration of Kathleen Hartnett
8 (“Hartnett Declaration”).
9 The second document is the “Ripple credits” page from Ripple’s Wiki website. Complaint ¶ 24
10 & n.7, ¶ 130 & n.91, ¶ 145 & n.99. A true and correct copy of an archived version of that webpage is
11 attached as Exhibit B to the Hartnett Declaration.2
12 The third document is the “Q1 2018 XRP Markets Report” page of Ripple’s website. Complaint
13 ¶ 36 & n.16. A true and correct copy of this webpage is attached as Exhibit C to the Hartnett
14 Declaration.
15 The fourth document is a CNBC article titled “Ripple is sitting on close to $80 billion and could
16 cash out hundreds of millions per month—but it isn’t.” Complaint ¶ 52 & n.31. A true and correct copy
17 of this article is attached as Exhibit D to Hartnett Declaration.
18 Pursuant to Federal Rule of Evidence 201, a court may “take judicial notice of documents on
19 which allegations in the complaint necessarily rely, even if not expressly referenced in the complaint,
20 provided that the authenticity of those documents is not in dispute.” Lalwani v. Burwell, 2015 WL
21 6123087, at *4 (N.D. Cal. Oct. 19, 2015) (citation omitted). All four documents are expressly
22 referenced by Plaintiff in the Complaint at the paragraphs indicated above, through citation and/or
23 quotation. Defendants do not dispute the documents’ authenticity, nor—after citing to them and quoting
24 from them directly—can Plaintiff. Further, courts may also take judicial notice of “records and reports
25
1
All documents incorporated by reference in the Complaint are properly before the Court on a motion to
26 dismiss, but this Request focuses on four documents that are particularly relevant to Defendants’
dismissal arguments.
27 2 This webpage does not exist at the link that Plaintiffs repeatedly cite in their complaint. The copy
attached as Exhibit B was located through archive.org and is displayed as it existed on September 28,
28 2017, which is the latest date available. Hartnett Decl. ¶ 3.
1
1 of administrative bodies.” Id. (quoting Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th
2 Cir. 1986), abrogated on other grounds by Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104
3 (1991)). This includes settlement agreements between parties and administrative agencies, such as
4 Exhibit A. Duncan v. San Dieguito Union High Sch. Dist., 2019 WL 4016450, at *2 (S.D. Cal. Aug. 26,
5 2019) (“Judicial notice is appropriate with respect to [the executed final settlement agreement] for the
6 purpose of the motion to dismiss because [it is a] record[] of an administrative agency.”).
7 Alternatively, Defendants request that the Court incorporate Exhibits A–D by reference. When a
8 document’s “contents are alleged in a complaint” or “the plaintiff’s claim depends on [its] contents,” and
9 no party questions the document’s authenticity, a court may consider the document on a motion to
10 dismiss without converting the motion to one for summary judgment. Knievel v. ESPN, 393 F.3d 1068,
11 1076 (9th Cir. 2005) (citations omitted); Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1159–60 (9th
12 Cir. 2012); In re Pac. Gateway Exch., Inc. Sec. Litig., 169 F. Supp. 2d 1160, 1164 (N.D. Cal. 2001) (“If
13 a plaintiff fails to attach to the complaint the documents on which it is based, defendant may attach to a
14 12(b)(6) motion the documents referred to in the complaint to show that they do not support plaintiff’s
15 claim”). In addition, where a claim is grounded in fraud, as are Plaintiff’s claims under California
16 Corporations Code Section 25401 and California’s False Advertising and Unfair Competition Laws, it is
17 appropriate to consider the entire alleged statement in context in order to determine what a reasonable
18 investor would believe. E.g., Haskell v. Time, Inc., 857 F. Supp. 1392, 1397–98 (E.D. Cal. 1994)
19 (incorporating by reference exemplar mailings on which misrepresentation claim was based); Patel v.
20 Parnes, 253 F.R.D. 531, 547 (C.D. Cal. 2008) (taking judicial notice of earnings call transcripts that
21 provided “full context in which the information was disclosed to the market”).
22 As explained above, the contents of all four documents are repeatedly alleged in the Complaint
23 by Plaintiff and their authenticity has not been (and cannot be) disputed by Plaintiff. The Court “may
24 treat such . . . document[s] as part of the complaint, and thus may assume that [their] contents are true
25 for purposes of a motion to dismiss under Rule 12(b)(6).” Davis, 691 F.3d at 1160 (quoting United
26 States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003)); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544,
27 568 n.13 (2007) (“[T]he District Court was entitled to take notice of the full contents of the published
28 articles referenced in the complaint, from which the truncated quotations were drawn”).
2
1 CONCLUSION
2 For the aforementioned reasons, Defendants respectfully request that the Court take judicial
3 notice of Exhibits A–D or, in the alternative, incorporate Exhibits A–D by reference.

6
By: /s/ Kathleen R. Hartnett
7
Telephone: (415) 293-6800
10 Facsimile: (415) 293-6899

New York, NY 10001
14 Telephone: (212) 446-2300
15 Facsimile: (212) 446-2350
16
919 Third Avenue
18 New York, NY 10022
19 Telephone: (212) 909-6000
Facsimile: (212) 909-6836

22
23
24
25
26
27
28
3

3 Telephone: (415) 293-6800
Facsimile: (415) 293-6899
New York, NY 10001
7 Telephone: (212) 446-2300
Facsimile: (212) 446-2350
10 919 Third Avenue
New York, NY 10022
11 Telephone: (212) 909-6000
Facsimile: (212) 909-6836
14

17 OAKLAND DIVISION

19 DECLARATION OF KATHLEEN HARTNETT
IN SUPPORT OF DEFENDANTS’ REQUEST
20 This Document Relates To: FOR JUDICIAL NOTICE
All Actions
21 Date: January 15, 2020
Time: 9:00 a.m.
22 Place: Courtroom 3
Judge: Hon. Phyllis J. Hamilton
23
Consolidated Complaint filed: August 5, 2019
24
[FILED CONCURRENTLY WITH
25 NOTICE OF MOTION AND MOTION TO
DISMISS, MEMORANDUM OF POINTS AND
26 AUTHORITIES; REQUEST FOR JUDICIAL
NOTICE]
27
28
DECLARATION OF KATHLEEN HARTNETT ISO REQUEST FOR JUDICIAL NOTICE

1 DECLARATION OF KATHLEEN HARTNETT

2 I, Kathleen R. Hartnett, declare and state as follows:
3 1. I am a partner with the law firm Boies Schiller Flexner LLP, attorneys of record in this
4 action for defendants Ripple Labs Inc. (“Ripple”), XRP II, LLC (“XRP II”), and Bradley Garlinghouse
5 (collectively, “Defendants”). I am a member of good standing of the Bar of the State of California, and I
6 am admitted to practice before this Court. I have personal knowledge of the matters set forth in this
7 declaration, and if called upon to do so, I would testify competently to them.
8 2. Plaintiff’s Consolidated Complaint for Violations of Federal and California Law

9 (“Complaint”) cites the Statement of Facts from the federal government’s May 2015 settlement
10 agreement with Ripple and XRP II. Complaint ¶ 2 & n.2; see also id. ¶¶ 25, 112. The Statement of
11 Facts is available at https://www.fincen.gov/sites/default/files/shared/Ripple_Facts.pdf. A true and

12 correct copy of the Statement of Facts is attached as Exhibit A.
13 3. Plaintiff’s Complaint cites and quotes from the “Ripple credits” page of Ripple’s Wiki
14 website. Complaint ¶ 24 & n.7, ¶ 130 & n.91, ¶ 145 & n.99. This webpage does not exist at the link
15 Plaintiff repeatedly cites in his Complaint. However, an archived copy of the webpage from September
16 28, 2017 (the most recent version on archive.org) containing the language Plaintiff quotes is available at
17 https://web.archive.org/web/20170928101259/https://wiki.ripple.com/Ripple_credits. A true and correct
18 copy of this archived “Ripple credits” webpage is attached as Exhibit B.
19 4. Plaintiff’s Complaint cites and quotes from the “Q1 2018 XRP Markets Report” page of
20 Ripple’s website. Complaint ¶ 36 & n.16. This webpage, dated April 25, 2018, is available at
21 https://www.ripple.com/insights/q1-2018-xrp-markets-report. A true and correct copy of this webpage
22 is attached as Exhibit C.
23 5. Plaintiff’s Complaint cites a CNBC article titled “Ripple is sitting on close to $80 billion
24 and could cash out hundreds of millions per month—but it isn’t.” Complaint ¶ 52. This article,
25 published Jan. 16, 2018, is available at https://www.cnbc.com/2018/01/16/why-ripple-is-not-cashing-
26 out-its-xrp-holdings.html. A true and correct copy of the article is attached as Exhibit D.
27 I declare under penalty of perjury under the laws of the United States of America that the
28 foregoing is true and correct.
1
1 Executed on September 19, 2019, in Oakland, California.

2
/s/ Kathleen R. Hartnett
3 Kathleen R. Hartnett
4
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2
EXHIBIT A
ATTACHMENT A: STATEMENT OF FACTS AND VIOLATIONS
I. INTRODUCTION AND BACKGROUND
1. Ripple Labs Inc. (“Ripple Labs”) is a corporation registered in Delaware and

headquartered in San Francisco, California. NewCoin, Inc. and OpenCoin, Inc.
(“OpenCoin”) are the predecessors of Ripple Labs.
2. Ripple Labs facilitated transfers of virtual currency and provided virtual currency
exchange transaction services.
3. The currency of the Ripple network, known as “XRP,” was pre-mined. In other
words, unlike some other virtual currencies, XRP was fully generated prior to its
distribution. As of 2015, XRP is the second-largest cryptocurrency by market
capitalization, after Bitcoin.
4. XRP Fund II, LLC, a wholly-owned subsidiary of Ripple Labs, was incorporated in
South Carolina on July 1, 2013. On July 2, 2014, XRP Fund II changed its name to
XRP II, LLC. During a portion of the relevant timeframe, the entity was named XRP
Fund II, LLC, but it will be referred to as XRP II throughout this document.
II. LEGAL FRAMEWORK
5. The U.S. Attorney’s Office for the Northern District of California (“U.S. Attorney’s
Office”) is a component of the Justice Department. The Financial Crimes
Enforcement Network (“FinCEN”) is a bureau within the Department of Treasury.
The Bank Secrecy Act and its implementing regulations require Money Services
Businesses (“MSBs”) to register with FinCEN by filing a Registration of Money
Services Business (“RMSB”), and renewing the registration every two years. See 31
U.S.C. § 5330; 31 C.F.R. § 1022.380. Operation of an MSB without the appropriate
registration also violates federal criminal law. See 18 U.S.C. § 1960(b)(1)(B). This
is a requirement separate and apart from state licensing requirements, if any, that may
be required by law.
6. On March 18, 2013, FinCEN released guidance clarifying the applicability of

regulations implementing the Bank Secrecy Act, and the requirement for certain
participants in the virtual currency arena to register as MSBs under federal law. See
FIN-2013-G0001, Application of FinCEN’s Regulations to Persons Administering,
Exchanging, or Using Virtual Currencies (Mar. 18, 2013) (the “Guidance”). Among
other things, the Guidance defines two categories of participants in the virtual
1
currency ecosystem: “exchangers” and “administrators.” The Guidance states that

exchangers and administrators of virtual currencies are money transmitters (a type of
MSB) under FinCEN’s regulations, and therefore are required to register with
FinCEN as money service businesses.
7. Specifically, the Guidance defines an exchanger as a person or entity “engaged as a

business in the exchange of virtual currency for real currency, funds, or other virtual
currency.” The Guidance also defines an administrator of virtual currency as a person
or entity “engaged as a business in issuing (putting into circulation) a virtual
currency, and who has the authority to redeem (to withdraw from circulation) such
virtual currency.”
8. Both exchangers and administrators are MSBs that must register with FinCEN unless
they fall within an exemption. And regardless of whether they have registered as
required, MSBs are subject to certain additional requirements under the Bank Secrecy
Act and its implementing regulations.
9. The Bank Secrecy Act and its implementing regulations require MSBs to develop,
implement, and maintain an effective written anti-money laundering (“AML”)
program that is reasonably designed to prevent the MSB from being used to facilitate
money laundering and the financing of terrorist activities. See 31 U.S.C. §§
5318(a)(2) and 5318(h); 31 C.F.R. § 1022.210.
10. Under the Bank Secrecy Act, an MSB is required to implement an AML program
that, at a minimum: (a) incorporates policies, procedures and internal controls
reasonably designed to assure ongoing compliance; (b) designates an individual
responsible for assuring day to day compliance with the program and Bank Secrecy
Act requirements; (c) provides training for appropriate personnel including training in
the detection of suspicious transactions; and (d) provides for independent review to
monitor and maintain an adequate program. 31 C.F.R. §§ 1022.210(d).
11. Further, an MSB must report transactions that the MSB “knows, suspects, or has
reason to suspect” are suspicious, if the transaction is conducted or attempted by, at,
or through the MSB, and the transaction involves or aggregates to at least $2,000.00
in funds or other assets. 31 C.F.R. § 1022.320(a)(2). A transaction is “suspicious” if
the transaction: (a) involves funds derived from illegal activity; (b) is intended or
conducted in order to hide or disguise funds or assets derived from illegal activity, or
to disguise the ownership, nature, source, location, or control of funds or assets
derived from illegal activity; (c) is designed, whether through structuring or other
means, to evade any requirement in the Bank Secrecy Act or its implementing
regulations; (d) serves no business or apparent lawful purpose, and the MSB knows of
2
no reasonable explanation for the transaction after examining the available facts,
including the background and possible purpose of the transaction; or (e) involves use
of the MSB to facilitate criminal activity. Id.
12. As part of their risk assessment and risk mitigation plans, MSBs are required to
implement Know-Your-Customer/Know-Your-Counterparty procedures. Such
procedures allow the MSB to assess the risk involved in providing account-based or
transactional services to customers based on their identity and profile, and to comply
with their AML Program requirements regarding foreign agents or foreign
counterparties. See FinCEN Interpretive Release 2004-1, Anti-Money Laundering
Program Requirements for Money Service Businesses With Respect to Foreign
Agents or Foreign Counterparties, 69 Fed. Reg. 74,439 (Dec. 14, 2004).
13. Financial institutions, including MSBs, are also subject to the Funds Transfer Rule,
31 C.F.R. § 1010.410(e), which provides that (subject to certain exceptions) for
individual transactions of $3,000.00 or above, the transmitting financial institution
must obtain, verify, and keep key information (set forth in the regulation) from the
transmitting party (the transmittor). If acting as an intermediary financial institution,
it must obtain and keep key information (the transmittal order received) from the
transmittor’s financial institution. And, if acting as the financial institution for the
recipient of the funds, the financial institution must obtain, verify, and keep key
information (also set forth in the regulation) from the recipient. The same financial
institution may be acting as both transmittor’s and recipient’s financial institution.
14. Similarly, financial institutions, including MSBs, are subject to the Funds Travel
Rule, 31 C.F.R. § 1010.410(f), which provides that (subject to certain exceptions) for
individual transactions of $3,000.00 or more, the transmittor’s financial institution
must pass on key information from the transmittor and the transaction to any
intermediary financial institution; if acting as the intermediary financial institution, it
must pass on this information to the recipient’s financial institution. And, if acting as
the recipient’s financial institution, it must receive, evaluate, and store this
information received from the intermediary or the transmittor’s financial institution.
15. The FinCEN registration requirement and other requirements of the Bank Secrecy
Act are independent obligations. An MSB’s failure to register with FinCEN does not
relieve an MSB of its obligations under the Bank Secrecy Act and implementing
regulations. Nor does an MSB’s registration with FinCEN mean that the MSB has
fulfilled all of its requirements under the Bank Secrecy Act and regulations. In other
words, an MSB might have complied with the Bank Secrecy Act and implementing
regulations, but failed to register as an MSB with FinCEN. Likewise, an entity might
3
have registered as an MSB with FinCEN, but not have complied with the Bank
Secrecy Act and implementing regulations.
III. VIOLATIONS
A. Ripple Labs’s Operation as a Money Services Business in March-April 2013
16. Ripple Labs has previously described itself in federal court filings and in a sworn
affidavit as “a currency exchange service providing on-line, real-time currency
trading and cash management . . . . Ripple facilitates the transfers of electronic cash
equivalents and provides virtual currency exchange transaction services for
transferrable electronic cash equivalent units having a specified cash value.” See
Ripple Labs, Inc. v. Lacore Enterprises, LLC, Motion for Preliminary Injunction, 13-
cv-5974-RS/KAW (N.D. Cal. 2013) (emphasis added).
17. From at least March 6, 2013, through April 29, 2013, Ripple Labs sold convertible
virtual currency known as “XRP.”
18. Ripple Labs was not registered with FinCEN as an MSB while engaging in these
sales.
19. As described in Paragraphs 6 and 7 above, on March 18, 2013, FinCEN released
guidance that clarified the applicability of existing regulations to virtual currency
exchangers and administrators. Among other things, this Guidance expressly noted
that such exchangers and administrators constituted “money transmitters” under the
regulations, and therefore must register as MSBs.
20. Notwithstanding the Guidance, and after that Guidance was issued, Ripple Labs
continued to engage in transactions whereby it sold Ripple currency (XRP) for fiat
currency (i.e., currency declared by a government to be legal tender) even though it
was not registered with FinCEN as an MSB. Throughout the month of April 2013,
Ripple Labs effectuated multiple sales of XRP currency totaling over approximately
$1.3 million U.S. dollars.
21. During the time frame that it was engaged in these sales and operated as a money
transmitter, Ripple Labs failed to establish and maintain an appropriate anti-money
laundering program. Ripple failed to have adequate policies, procedures, and internal
controls to ensure compliance with the Bank Secrecy Act and its implementing
regulations. Moreover, Ripple Labs failed to designate a compliance officer to assure
compliance with the Bank Secrecy Act, had no anti-money laundering training in
place, and failed to have any independent review of its practices and procedures.
4
B. XRP II’s Program and Reporting Violations
22. On July 1, 2013, Ripple Labs incorporated a subsidiary, XRP Fund II, LLC (“XRP
Fund II”), now known as XRP II, LLC, in South Carolina. XRP II was created to
engage in the sale and transfer of the convertible virtual currency, XRP, to various
third parties on a wholesale basis. XRP II sold XRP currency in exchange for fiat
currency in much the same way that Ripple Labs had previously done from March
through April 2013. In other words, XRP II replaced Ripple Labs as a seller of XRP.
23. By on or about August 4, 2013, XRP II was engaged in the sale of XRP currency to
third-party entities.
24. On September 4, 2013, XRP II registered with FinCEN as an MSB.
25. As of the date XRP II engaged in sales of virtual currency to third parties in exchange
for value, XRP II became subject to certain requirements under the Bank Secrecy Act
and its implementing regulations, as described in Paragraphs 5 through 15 above.
XRP II was required to have an effective written AML program, to implement that
program, and to have an anti-money laundering compliance officer.
26. Notwithstanding these requirements, despite engaging in numerous sales of virtual

currency to third parties, XRP II failed to have an effective, written AML program.
For example:
a) It was not until September 26, 2013, that XRP II developed a written AML
program. Prior to that time, XRP II had no written AML program;
b) It was not until late January 2014 that XRP II hired an AML compliance officer,
some six months after it began to engage in sales of virtual currency to third
parties;
c) XRP II had inadequate internal controls reasonably designed to ensure

compliance with the Bank Secrecy Act;
d) XRP II failed to conduct an AML risk assessment until March 2014;
e) XRP II did not conduct training on its AML program until nearly a year after
beginning to engage in sales of virtual currency, by which time Ripple Labs was
aware of a federal criminal investigation; and
5
f) XRP II did not conduct an independent review of its AML program until nearly a
year after it began to engage in sales of virtual currency, by which time Ripple
Labs was aware of a federal criminal investigation.
27. Further, from the date XRP II began engaging in sales of virtual currency to third
parties, XRP II was required to report transactions that it knew, suspected, or had
reason to suspect were suspicious and where the transactions or attempted
transactions involved or aggregated to at least $2,000.00 in funds or other assets. See
31 C.F.R. § 1022.320(a)(2).
28. In addition to XRP II’s lack of an effective AML program, XRP II also engaged in a
series of transactions for which it either failed to file, or untimely filed, suspicious
activity reports. For example:
a) On September 30, 2013, XRP II negotiated an approximately $250,000.00

transaction by email for a sale of XRP virtual currency with a third-party
individual. XRP II provided that individual with a “know your customer”
(“KYC”) form and asked that it be returned along with appropriate identification
in order to move forward with the transaction. The individual replied that another
source would provide the XRP virtual currency and did not “require anywhere
near as much paperwork” and essentially threatened to go elsewhere. Within
hours, XRP II agreed by email to dispense with its KYC requirement and move
forward with the transaction. Open source information indicates that this
individual, an investor in Ripple Labs, has a prior three-count federal felony
conviction for dealing in, mailing, and storing explosive devices and had been
sentenced to prison, see United States v. Roger Ver, CR 1-20127-JF (N.D. Cal.
2002);
b) In November 2013, XRP II rejected an approximately $32,000.00 transaction

because it doubted the legitimacy of the overseas customer’s source of funds.
XRP II failed to file a suspicious activity report for this transaction; and
c) In January 2014, a Malaysian-based customer sought to purchase XRP from XRP

II, indicating that he wanted to use a personal bank account for a business
purpose. Because of these concerns, XRP II declined the transaction but again
failed to file a suspicious activity report for the transaction.
6
EXHIBIT %
9/17/2019 Case 4:18-cv-06753-PJH Document Ripple credits
70-4 - Ripple
FiledWiki
09/19/19 Page 2 of 4
This website
https://wiki.ripple.com/Ripple_credits is no longer actively supported. GoPlease
DEC see
SEPtheOCT ⍰❎
Ripple Developer Center for up-to-date documentation
8 captures
other resources.
28and f
4 Sep 2014 - 28 Sep 2017 2016 2017 2018 ▾ About this capture
Ripple credits
From Ripple Wiki
Contents
1 Introduction
2 XRP protects the network from abuse
3 XRP is a bridge currency
4 XRP funds the development and promotion of the protocol and the network
5 Network transaction fees are destroyed
6 Summarized
7 Technical Details
8 Notes on drops
9 Trivia
Introduction
Ripple credits, aka XRP or ripples, are the Ripple network's internal, or native, currency.
See also:
Currency format
XRP protects the network from abuse

XRP protects the network in two ways:
XRP prevents transactions spam.

XRP prevents ledger spam.
To prevent the network from being DDOSed by unlimited transactions, the network charges a, normally, negligible
fee to distribute a transaction. When the network is under load, such as when it is attacked, this fee rapidly goes up.
This rise in fees quickly bankrupts attackers and keeps the network functioning.
The Ripple ledger keeps track of the state of Ripple accounts. To keep the network ledger size manageable, a
reserve of XRP is needed to use space in the ledger. Releasing this space release the reserved XRP. Without this
reserve, attackers could make the ledger grow until it became unmanageable.
See also:
Reserves
https://web.archive.org/web/20170928121624/https://wiki.ripple.com/Ripple_credits 1/3
70-4 - Ripple
FiledWiki
09/19/19 Page 3 of 4
This website is no longer actively supported. GoPlease
DEC see theOCT
XRP is a bridge currency
X https://wiki.ripple.com/Ripple_credits
Ripple Developer Center for up-to-date documentation
SEP
and
⍰ ❎
8 captures
other resources.
28 f
A bridge
brid
br idge
id ge ccurrency
urre
ur renc
rencyy is uused
nc sedd as a nneutral,
se eutr
eutral
tral,, tr
al trus
trusted
uste
us tedd cu
te curr
currency
rren
rr ency
ency ffor
or pparties
arti
arties
ti es tto
o tr
tran
transact
ansa
an sact
sa ct iin
n wh
when
en pparties
arti
arties
ties ddon't
on t pprefer
refe
referr th
fe thee sa
same
me
currency. For example, Alice prefers USD and Bob prefers EUR. If they can not find a direct way to convert
currencies, they may convert their preferred currency to and from XRP to be able to transact with each other.
Three factors make XRP an ideal bridge currency:
XRP has low friction.

XRP has no counter party risk.
XRP can not be debased.
XRP has low friction as it can be sent directly to any account on the Ripple network with no transfer fees.
XRP is the only currency in the Ripple network that has no counter party risk and can be sent to any account
without a trust relationship.
XRP can not be debased. When the Ripple network was created, 100 billion XRP was created. The founders gave
80 billion XRP to the Ripple Labs. Ripple Labs will develop the Ripple software, promote the Ripple payment
system, give away XRP, and sell XRP.
XRP funds the development and promotion of the

protocol and the network
Ripple Labs sells XRP to fund its operations and promote the network. This allows Ripple Labs to have a
spectacularly skilled team to develope and promote the Ripple protocol and network.
See: Ripple Labs Team (https://web.archive.org/web/20170928121624/https://www.ripplelabs.com/team/)
Network transaction fees are destroyed

XRP spent as transaction fees are destroyed. The default transaction fee is currently 10 drops. There should be
enough XRP to last for thousands of years despite this destruction. If the value of XRP changes, the transaction fee
can be adjusted by the consensus of the network.
The rate of loss of XRP due to losing passwords is thousands of times more significant compared to the amount
lost as transaction fees.
Because XRP are divisible, even if only 1 XRP remained, it could be divided up among the users of the network
and be enough for the whole world to use.
Summarized
Potential primary uses of XRP:
Prevent transaction SPAM

Fees are destroyed.
70-4 - Ripple
FiledWiki
09/19/19 Page 4 of 4
People lose XRPThis
faster
https://wiki.ripple.com/Ripple_creditswebsite
than is
fees
no are
longer
destroyed.
actively supported. GoPlease
DEC see
SEPtheOCT ⍰❎
Divisibility allows
Ripplethere
Developer
to always Center
be enough.
for up-to-date documentation
8 captures
Prevent ledger SPAM other resources.
28and f
20 X XRP
RP is
is the
the account
acco
accoun
untt re
rese
reserve.
serv
rve.
e.
Send at least 20 XRP to create an account.
Can only send XRP in excessive of reserve.
Reserve can be used to pay for transactions.
Vehicle currency
Frictionless (no fees).
No counterparty (no defaults).
No debasement.
Fund development and promotion of the Ripple protocol and network
Ripple Labs ~50 highly skilled employees.
Technical Details
XRP is the proposed ISO 4217 currency code designated for Ripple.
XRP as currently implemented has six digits of precision. The smallest unit is one millionth of an XRP ( 0.000001
) and is called a "drop". That is: 1 XRP = 1,000,000 drops.
Notes on drops
The number 100 billion was chosen for human factors. The precision of drops allows for 5 bits of flags in a 64 bit
representation: 1 bit flag to note XRP format, 1 bit to indicate sign, and 3 bits unused.
Most libraries will be considered adequate if they can represent the 100 billion original XRP as drops
(100,000,000,000,000,000 drops). This number will fit in a 59 bit unsigned integer.
100,000,000,000,000,000 = 10^17 = 10^11 * 10^6

576,460,752,303,423,488 = 2^59
The JavaScript number format allows exact representation of all integers between −9,007,199,254,740,992 (−2^53)
and 9,007,199,254,740,992 (2^53), inclusive. This is inadequate to represent the full range of XRP. Therefore.
XRP must be represented in JavaScript using a big number library or string.
Trivia
The name "drops" was first proposed
(https://web.archive.org/web/20170928121624/https://ripple.com/forum/viewtopic.php?
f=1&t=40&p=228&hilit=drops#p228) by ThePiachu.
Retrieved from "https://wiki.ripple.com/index.php?title=Ripple_credits&oldid=8270"
This page was last modified on 12 July 2014, at 20:29.
EXHIBIT &
9/18/2019 Q1 2018 XRP70-5
Case 4:18-cv-06753-PJH Document Markets Filed
Report | Ripple
09/19/19 Page 2 of 9
Q1 2018 XRP Markets Report

7 MIN½READb•bMIGUEL VIAS APR 25, 2018
To continue to provide transparency to the XRP ecosystem globally, we share regular updates
on the state of the market, including quarterly sales, relevant XRP-related announcements and
commentary on previous quarter market developments.
Quarterly Sales
In Q1 2018, market participants purchased $16.6 million directly from XRP II, LLC — our
registered and licensed money service business (MSB). XRP II, LLC is licensed to engage in
Virtual Currency Business Activity by the New York State Department of Financial Services.
Additionally, the company sold $151.1 million worth of XRP programmatically, as a small
percentage of overall exchange volume. These sales represented 0.095 percent (9.5 basis
points) of the $160.0 billion traded globally in XRP in Q1. Significantly larger volumes of XRP
were traded in Q1, particularly during the first half of the quarter, resulting in a notional increase
in programmatic sales by Ripple.
Escrow
In Q1 2018, XRP was released out of a cryptographically-secured escrow account

(https://ripple.com/insights/ripple-escrows-55-billion-xrp-for-supply-predictability/). Three
billion XRP was released out of escrow (one billion in January, February and March). However,
2.7 billion XRP was put back into new escrow contracts — 900 million in months 56, 57 and 58.
The remaining 300 million XRP are being used in a variety of ways to help invest in the XRP
ecosystem.
Market Commentary: A Volatile Quarter, but XRP Market Share Increases
https://www.ripple.com/insights/q1-2018-xrp-markets-report/ 1/8
9/18/2019 Q1 2018 XRP70-5
Report | Ripple
09/19/19 Page 3 of 9
(https://ripple.com/wp-content/uploads/2014/10/Graph-1.png)
The rally that began in Q4 2017 continued into the start of the new year, before retracing
consistently throughout the remainder of the quarter. The total market capitalization of all
digital assets stood at $603.7 billion at the start of 2018, climbed to $835.5 billion by January 7,
and finished the quarter at $263.5 billion — a 56.3 percent decline over the course of the
quarter.
XRP’s Fall Representative of Overall Digital Asset Market
XRP’s overall market capitalization mirrored that of the overall digital asset market, though at
times it was somewhat exaggerated in comparison. XRP began the quarter at $1.91 and
finished the quarter at $0.51, a 73 percent drop from January 1. On March 31, 2018, XRP was up
exactly 100 percent from the rally that began December 11. Broadly, Q1 market participants did
not differentiate between different digital assets. While the Q4 rally was more sequential in
nature, with interest in one asset waning as it increased in another, the Q1 retracement was
indiscriminate, with the market collectively exiting positions. In fact, on February 25, XRP’s
minimum 30-day correlation to the other top nine digital assets was 76 percent.
9/18/2019 Q1 2018 XRP70-5
Report | Ripple
09/19/19 Page 4 of 9
(https://ripple.com/wp-content/uploads/2014/10/Graph2.png)
In addition, XRP had its highest volume quarter in history, with a total of $160.0 billion notional
traded.
Market Share of XRP Doubles
Though XRP largely followed broader market price action in Q1, there were some significant
deviations. For example, while the total market capitalization of all digital assets was the same
on both November 24, 2017 and March 31, 2018, XRP’s share of that market capitalization
doubled, rising from 3.56 percent to 7.57 percent — a continuation of a trend that first began in
2017.
XRP’s share of overall market volume (6.9 percent) also grew significantly compared to its share
in Q4 (5.3 percent) and 2017 overall (5.0 percent). Part of the increase in XRP’s share of volume
was driven by 18 new venues listing XRP in Q1, including both US-based Abra
(https://techcrunch.com/2018/03/15/abra-adds-twenty-cryptocurrencies-to-its-wallet-app/) and
Uphold (https://ripple.com/insights/xrp-ecosystem-grows-with-new-listing-on-uphold/). This
brought the total number of exchanges that list XRP to more than 60.
XRP’s volume was also driven by the extension of more than $16 million in new XRP loans from
XRP II, LLC to market makers. A significant pain point for digital asset liquidity providers is the
need to purchase or borrow assets in order to provide both bids and offers. Now, with the ability
to secure cost-effective, capital-efficient XRP loans, market makers are less challenged to get
9/18/2019 Q1 2018 XRP70-5
Report | Ripple
09/19/19 Page 5 of 9
involved in XRP markets. The added flexibility also allows liquidity providers to tighten spreads
as their margins aren’t hampered by the high costs of sourcing inventory or by the risk of
holding significant amounts of inventory.
For Ripple, this additional liquidity is useful for xRapid (https://ripple.com/solutions/source-

liquidity/) as it increases the capacity of order books to support cross-border payments. Also,
incremental liquidity in order books will lower volatility over time, further increasing XRP’s ability
to provide on-demand liquidity for xRapid.
Important News Moments
Q1 was dominated by headlines across the digital asset market. Those headlines ranged from
specific xRapid customer announcements to regulatory developments around the globe.
xRapid
In Q1, Ripple announced five new xRapid pilot customers — Western Union
(http://fortune.com/2018/02/14/ripple-xrp-western-union-money-transfers/), Cambridge Global
Payments (https://ripple.com/insights/cambridge-use-xrp-faster-global-payments/), MercuryFX
(http://www.businessinsider.com/ripple-cryptocurrency-xrp-adds-2-financial-services-firms-
client-roster-2018-1), IDT (http://www.businessinsider.com/ripple-cryptocurrency-xrp-adds-2-
financial-services-firms-client-roster-2018-1) and MoneyGram
(https://www.wsj.com/articles/moneygram-signs-deal-to-work-with-currency-startup-ripple-
1515679285). The pilots, which involve live transactions, have continued to prove that xRapid
can lower liquidity costs and dramatically increase payment speed and transparency using XRP.
In Q2, Ripple will look to grow the number of xRapid pilots and work to move existing pilots into
production.
Changes to Major Index Prices
On January 8, Coinmarketcap.com unexpectedly removed South Korean digital asset exchanges

from all of its index prices (https://www.wsj.com/articles/a-crypto-website-changes-its-data-
and-100-billion-in-market-value-vanishes-1515443100). The decision seemed to be motivated by
increasing premiums, sometimes as high as 40 percent on the Korean exchanges, which were
dislocating prices on the site. The change artificially erased $100 billion in market value, which
resulted in significant market turbulence. While it impacted all digital asset prices, XRP’s
relatively high share of volume from the South Korean market meant its displayed price dropped
9/18/2019 Case 4:18-cv-06753-PJH Document Q1 2018 XRP70-5
Markets Filed
Report | Ripple
09/19/19 Page 6 of 9
disproportionately versus other top digital assets. XRP fell 19.1 percent versus an average of
7.2 percent for the other top five digital assets by market capitalization on
Coinmarketcap.com’s index price.
Continued Regulatory Developments
While the Coinmarketcap.com index adjustment drove Q1 volatility initially, the primary driver of
price action throughout the quarter seemed to be an anticipation of a more restrictive regulatory
environment for digital assets across the globe. Local regulators became increasingly
concerned about consumer protection in their respective countries. In early January, rumors
swirled about an outright ban (https://www.reuters.com/article/us-southkorea-bitcoin/uproar-
over-crackdown-on-cryptocurrencies-divides-south-korea-idUSKBN1F10YG) of digital assets in
South Korea. Within days of that report, the country’s finance minister stated that an outright
ban on digital assets was unrealistic (https://www.reuters.com/article/us-southkorea-
bitcoin/south-korea-says-no-plans-to-ban-cryptocurrency-exchanges-uncovers-600-million-
illegal-trades-idUSKBN1FK09J). The mixed reports, coupled with already turbulent market
activity, drove 30-day volatility of daily returns to 23 percent on January 10, XRP’s second-
highest volatility level following its April 2017 run up in price.
(https://ripple.com/wp-content/uploads/2014/10/Graph3.png)
China furthered its tougher regulatory stance, increasing the scope of its bans on digital asset
trading (https://www.coindesk.com/pboc-official-calls-for-wider-ban-on-chinese-crypto-trading-
report/). While initial coin offerings (ICOs) and digital asset-to-fiat currency exchange trading
had already been banned in China, local regulators expanded the ban to over-the-counter (OTC)
trading, digital asset trading on foreign exchanges and providers of online wallet services.
9/18/2019 Q1 2018 XRP70-5
Report | Ripple
09/19/19 Page 7 of 9
We also saw regulators take action against specific exchanges. In January, the CFTC
subpoenaed Bitfinex and Tether (https://www.bloomberg.com/news/articles/2018-01-
30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc) to investigate whether
Tether had backed each of its digital coins with U.S. dollars held in reserve. And in Japan,
regulators engaged Coincheck, which suffered the largest hack in digital asset history
(https://www.forbes.com/sites/outofasia/2018/01/29/tracing-back-stolen-cryptocurrency-xem-
from-japans-coincheck/#736803277eb6), resulting in the loss of $534 million worth of NEM
tokens.
The volatility of January spurred some financial institutions

(https://www.coindesk.com/coinbase-confirms-4-banks-blocking-bitcoin-purchases-on-credit-
cards/) to ban cryptocurrency purchases using their credit cards. Around the same time,
Agustín Carstens, general manager for the Bank for International Settlements (BIS), described
bitcoin as “a combination of bubble, Ponzi scheme, and an environmental disaster.
(https://www.ft.com/content/78bf5612-0b1a-11e8-839d-41ca06376bf2)”
Further, many countries called for the G20 to consider how to regulate digital assets at their
meeting in March. The Financial Stability Board noted to the G20 that rules are needed to ensure
consumer protection, yet said “cryptoassets do not pose risks to global financial stability at this
time.”
The G20 ended its March meeting stating (https://back-

g20.argentina.gob.ar/sites/default/files/media/communique_g20.pdf), “We acknowledge that
technological innovation, including that underlying crypto-assets, has the potential to improve
the efficiency and inclusiveness of the financial system and the economy more broadly.”
Additionally, the G20 announced it will continue monitoring the technology, collecting more
information through the summer to ensure its regulatory recommendations capture risk without
stifling innovation.
This viewpoint lays the foundation for a thoughtful regulatory framework.
Additionally, positive developments continued at the country level:
1. Mexico’s Senate approved a bill that creates a regulatory framework for fintech,
including digital assets. Now awaiting the president’s approval, the bill creates the
foundation for greater enterprise adoption (https://ripple.com/ripple_press/ripple-applauds-
mexicos-lower-house-of-congress-for-passing-fintech-rules/).
9/18/2019 Q1 2018 XRP70-5
Report | Ripple
09/19/19 Page 8 of 9
2. The European Commission issued a Fintech Action Plan (http://europa.eu/rapid/press-
release_IP-18-1403_en.htm?locale=en) that embraces many new technologies. The
Commission is studying digital assets and will issue a report on their use cases later this
year.
3. The United Kingdom’s government announced a Cryptoassets Task Force
(https://www.gov.uk/government/news/fintech-sector-strategy-launched-at-international-
fintech-conference) to ensure the country will “be at the forefront of harnessing the
potential benefits” while safeguarding against risk.
If you’re interested in the last two quarterly reports, you can find Q4 2017 here
(https://ripple.com/insights/q4-2017-xrp-markets-report/) and Q3 2017 here
(https://ripple.com/xrp/q3-2017-xrp-markets-report/).
Subscribe to the Ripple Insights newsletter.
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Resources
XRP Overview (https://www.ripple.com/xrp/)

How to Buy XRP (https://www.ripple.com/xrp/buy-xrp/)
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Support
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EXHIBIT '
9/18/2019 Case 4:18-cv-06753-PJH Why Ripple is not70-6
Document cashing out its XRP
Filed holdings
09/19/19 Page 2 of 7
Ripple is sitting on close to $80 billion and could cash out

hundreds of millions per month — but it isn’t
cnbc.com/2018/01/16/why-ripple-is-not-cashing-out-its-xrp-holdings.html
January 16, 2018
Ripple could bring in hundreds of millions of dollars a month by selling a tiny fraction of its XRP
holdings.
The company put 55 billion XRP in an escrow account, which allows it to sell up to 1 billion
every month.
Ripple can sell XRP if it needs to make acquisitions or fund new projects.
Ripple
Sixteen months ago, Ripple raised $55 million by selling equity in a typical Silicon Valley funding
round from strategic investors, following earlier financing from Alphabet’s GV (Google Ventures),
Andreessen Horowitz and others. The round placed the value of the company around $400 million.
Today the San Francisco start-up could bring in many times that amount of cash every month -- if it
wanted to -- without giving up any company ownership or control.
Ripple develops software that banks use for fast global financial settlements. But almost all of its
current value comes from being the creator and majority holder of XRP, a digital currency that was
obscure a year ago, but now has a total market value of about $130 billion.
https://www.cnbc.com/2018/01/16/why-ripple-is-not-cashing-out-its-xrp-holdings.html 1/6
Filed holdings
09/19/19 Page 3 of 7
XRP, which trades publicly like bitcoin, went on an inexplicable rally starting last year. Even after
plummeting from a high of $3.84 in early January to $1.30 (including a 30 percent drop on Tuesday),
it’s still up almost 200-fold in the past 12 months.
Ripple owns about 60 billion of the 100 billion XRP created, giving it a market value -- based just on
its holdings -- of close to $80 billion.
The company’s revenue is unknown, although CEO Brad Garlinghouse told CNBC that some banks
are paying the company millions of dollars for its software. Regardless, $80 billion is far ahead of
where any reasonable investor would value the company.
A tough company to value

Ripple has placed limitations on how much XRP it can sell each month to remove the concern that it
will suddenly flood the market with tokens. The company placed 55 billion of its XRP in a
“cryptographically-secured” escrow account and can release up to 1 billion every month. Ripple has
never come close to selling that amount in a month and said in December that it’s averaged selling
300 million XRP a month since mid-2016.
By selling a tiny fraction of its holdings each month, the company brought in over $90 million in the
first three quarters of 2017.
Ripple hasn’t released its fourth-quarter XRP report yet, but if it continued selling the same amount
programmatically, as a percentage of overall XRP traded, it would have raised more than $75 million
in the fourth quarter and another $150 million just in the first half of January. That doesn’t include
money made from direct sales.
Filed holdings
09/19/19 Page 4 of 7
The company can dial back how much XRP it puts on the market, so there’s no reason to expect that
it’s reeling in hundreds of millions of dollars a quarter. But just having that ability puts Ripple in a cash
position that’s extremely rare -- particularly for a start-up with just 170 employees -- and gives it the
flexibility to quickly bring in money for a pricey acquisition, fund an ambitious new project or invest in
other start-ups.
Ripple executives just invested some of their XRP as part of a $25 million funding round in a storage
start-up called Omni.
“In all likelihood, they need cash less than any other company on the planet,” said Timothy Enneking,
managing director of Crypto Asset Management, a crypto hedge fund in San Diego with about $70
million in assets.
Jeremy Liew of Lightspeed Venture Partners invested in Ripple in 2013, before the currency had any
value and when the company was focused on consumer peer-to-peer payments. He doesn’t have a
board seat and isn’t close to the company, but is suddenly looking at a potentially very valuable
stake.
Figuring out exactly how to value that stake is no easy task: Lightspeed owns illiquid shares in a
private company, whose soaring paper value is derived from a highly volatile asset that it plans to
monetize in small chunks over the course of many years.
Jeremy Liew
Source: Lightspeed Venture Partners
“It’s absolutely unprecedented,” said Liew, who’s best known for his early bet on Snap. “It hadn’t been
material until the end of last quarter, so now we have to think it through.”
Filed holdings
09/19/19 Page 5 of 7
Seagate, through an investment in Ripple in 2016, could own a stake worth close to $8 billion,
according to a report last week from Deep Value Research. The stock has rallied 20 percent since
the report on Jan. 8, even though the company has said nothing about it publicly.
The anti-bitcoin
While Ripple’s ability to practically print money puts it in an admirable place, the start-up has
attracted plenty of controversy in the world of cryptocurrencies and blockchain.
Bitcoin is a decentralized currency that has to be mined to enter circulation and was created by a
mysterious and still unidentified person using the pseudonym Satoshi Nakamoto.
The Ripple payment system, by contrast, is the creation of a single company that owns the majority
of XRP and has control over when it hits the market.
Critics on and elsewhere comment on how crazy it is that Ripple just created a currency “out of thin
air.” Additionally, the currency is hardly being used, making it even more difficult to justify the price
surge.
Ripple’s core product, xCurrent, is used by banks as a messaging solution that allows them to settle
cross-border payments quickly. But they’re not using XRP for that. A newer and still nascent Ripple
product called xRapid allows financial institutions to convert fiat currencies to XRP quickly and
cheaply, and transact digitally in real time.
Last week Ripple made its first significant customer announcement for xRapid. It said that
MoneyGram will use the technology and XRP to speed up and reduce the cost of transferring money.
Viamericas, a money transmitter focused on sending money to Latin America and Asia, said that that
it’s testing XRP.
Filed holdings
09/19/19 Page 6 of 7
Ripple claims an average transaction on its network takes between two and three seconds to
process. Bitcoin transactions take around 51 minutes on average, according to data by industry
website Blockchain.info.
“Bitcoin showed us what’s possible, but it’s not going to solve every use case,” said Garlinghouse,
Ripple’s CEO, who personally owns billions of dollars worth of combined Ripple equity and XRP at
the current price. “I’m personally long bitcoin, because I think it solves a problem around the store of
value.”
In other words, Garlinghouse sees bitcoin as a form of digital gold, attracting investors looking to
diversify their holdings. But XRP has a specific use and, if he’s right, it will be the way that financial
firms transact over blockchain.
“We’re driving velocity and demand of XRP,” Garlinghouse said.
Brad Garlinghouse, chief executive officer of Ripple Labs Inc.
David Paul Morris | Bloomberg | Getty Images
None of that makes it any easier to grasp the value of XRP, which helps explain the wild price swings.
The best explanation for its surge is the increasing global interest in cryptocurrencies and the
proliferation of online exchanges that make it possible to buy, sell and hold these types of assets.
Enneking said that for his Crypto Asset Management fund he recently shorted XRP, and he’s been
more bullish on bitcoin and ethereum.
“I have a tough time understanding, even if a lot of banks use Ripple to move billions of dollars, why
does that increase the value of XRP?” he said. “I don’t understand what drives price formation.”
Filed holdings
09/19/19 Page 7 of 7
If 2017 (and 2018 so far) has taught us anything about cryptocurrency, it’s that extreme volatility is
the norm. XRP could crash below 10 cents just as quickly as it soared past $3 for any number of
reasons, or no reason at all.
With that sort of risk, it would make sense for Ripple to maximize its monthly XRP sales and pad its
cash position as much as possible. But Garlinghouse gave no indication that he’s pushing in that
direction.
“For everything I do, I think what is in the best interest of the XRP ecosystem,” he said.
Correction: A previous version of this story mistakenly said GV and Andreessen Horowitz participated
in the 2016 round, instead of noting that they were earlier investors. It also incorrectly said Ripple
created XRP currency, but it actually started the payment system.

10 OAKLAND DIVISION
11

13
[PROPOSED] ORDER GRANTING
14 This Document Relates To: DEFENDANTS RIPPLE LABS INC., XRP II,
All Actions LLC, AND BRADLEY GARLINGHOUSE’S
15 MOTION TO DISMISS AND REQUEST FOR
JUDICIAL NOTICE
16
17
18
19
20
21
22
23
24
25
26
27
28
[PROPOSED] ORDER GRANTING MTN TO DISMISS AND REQUEST FOR JUDICIAL NOTICE
1 On January 15, 2020, at 9:00 a.m., Defendants Ripple Labs Inc. (“Ripple”), XRP II, LLC (“XRP
2 II”), and Bradley Garlinghouse’s (collectively, “Defendants’”) Motion to Dismiss the Consolidated
3 Class Action Complaint of Plaintiff Bradley Sostack, individually and on behalf of all others similarly
4 situated, pursuant to Federal Rule of Civil Procedure 12(b)(6), and Defendants’ Request for Judicial
5 Notice in Support of the Motion to Dismiss, pursuant to Federal Rule of Evidence 201, was heard in
6 Courtroom 3 of the above-referenced Court. Appearances of counsel are as noted in the Court’s record.
7 Upon consideration of all the papers filed in connection therewith and the oral argument of
8 counsel, IT IS HEREBY ORDERED that:
9 1. Defendants’ Request for Judicial Notice is GRANTED. The Court takes judicial notice
10 of Exhibits A through D attached to the Declaration of Kathleen Hartnett in Support of Defendants’
11 Request for Judicial Notice, including because they are relied upon, cited to, and quoted from in
12 Plaintiff’s Complaint. Lalwani v. Burwell, 2015 WL 6123087, at *4 (N.D. Cal. Oct. 19, 2015).
13 2. Defendants’ Motion to Dismiss is GRANTED WITH PREJUDICE. First, Plaintiff’s

14 federal securities claims (Counts 1 and 2) are dismissed because they are barred by the three-year statute
15 of repose in 15 U.S.C. § 77m. They are also dismissed because Plaintiff fails to plausibly allege that he
16 purchased XRP as part of an “initial distribution,” Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 571–572
17 (1995), or that Defendants were the “sellers” of the XRP he purchased, Pinter v. Dahl, 486 U.S. 622,
18 647 (1988). Second, Plaintiff’s California Corporations Code claims for unqualified securities (Counts
19 3 and 5) are dismissed because Plaintiff fails to plausibly allege (1) an “issuer transaction,” Mirkin v.
20 Wasserman, 5 Cal. 4th 1082, 1104 (1993); (2) privity with Defendants, Bowden v. Robinson, 67 Cal.
21 App. 3d 705, 712 (Ct. App. 1977); or (3) that Defendants offered or sold XRP to Plaintiff in California,
22 Siegal v. Gamble, 2016 WL 1085787, at *7 (N.D. Cal. Mar. 21, 2016). Third, Plaintiff’s
23 misrepresentation claim (Count 4) is dismissed because Plaintiff fails to plausibly allege (1) privity with
24 Defendants, Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 252–54
25 (2007); (2) XRP purchases in California, Diamond Multimedia Sys., Inc. v. Superior Court, 19 Cal. 4th
26 1036, 1053 (1999); (3) a statement made in connection with his XRP purchases, Apollo, 158 Cal. App.
27 4th at 249; or (4) an actionable misstatement under Rule 9(b), Vess v. Ciba-Geigy Corp. USA, 317 F.3d
28 1097, 1106 (9th Cir. 2003). Fourth, Plaintiff’s claims for liability under California’s False Advertising
1
1 Law and Unfair Competition Law (Counts 6 and 7) are dismissed because they (1) as alleged, relate to
2 “securities transactions,” Bowen v. Ziasun Tech., 116 Cal. App. 4th 777, 788 (2004); (2) fall within
3 those statutes’ safe harbor due to the federal Securities Act’s three-year statute of repose, Cel-Tech
4 Commc’ns, Inc. v. L.A. Cell. Tel. Co., 20 Cal. 4th 163, 182 (1999); Pom Wonderful LLC v. Coca Cola
5 Co., 2013 WL 543361, at *5 (C.D. Cal. Feb. 13, 2013); and (3) are insufficiently pled under Rule 9(b),
6 Wolph v. Acer Am. Corp., 2009 WL 2969467, at *5 (N.D. Cal. Sept. 14. 2009). Amendment of
7 Plaintiff’s complaint would be futile, including because (1) Plaintiff’s federal securities claims are
8 barred by 15 U.S.C. § 77m’s three-year statute of repose, (2) Plaintiff’s state securities claims cannot lie
9 because Plaintiff purchased his XRP on virtual currency exchanges and lacks privity with Defendants,
10 and (3) Plaintiff’s FAL and UCL claims are barred by those statutes’ safe harbor, in light of 15 U.S.C. §
11 77m. Given this futility, the above-captioned action is hereby dismissed in its entirety without leave to
12 amend. Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999).
13 3. The clerk is directed to close the file in this matter.

14
15 Dated: _______________________________
HON. PHYLLIS J. HAMILTON
16
UNITED STATES CHIEF DISTRICT JUDGE
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Case 4:18-cv-06753-PJH Document 70 Filed 09/19/19 Page 1 of 36

1 Kathleen R. Hartnett (SBN 314267)

15 UNITED STATES DISTRICT COURT

18 In re RIPPLE LABS INC. LITIGATION, Case No. 18-cv-06753-PJH

25 Consolidated Complaint filed: August 5, 2019

MOTION TO DISMISS CONSOLIDATED COMPLAINT

1 NOTICE OF MOTION AND MOTION

9 Procedure and seeks dismissal of the Complaint with prejudice.

15 Dated: September 19, 2019 Respectfully Submitted,

22 Damien J. Marshall (pro hac vice admitted)

1 Telephone: (212) 909-6000

1 1. Plaintiff Fails To Allege Privity Or An In-State Transaction ................................17

3 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC

1 Hadley v. Kellogg Sales Company

1 Lockheed Martin Corp. v. Network Solutions, Inc.

1 Welgus v. TriNet Grp., Inc.

8 Cal. Corp. Code § 25008(a) ...................................................................................................................... 16

9 Cal. Corp. Code § 25110..................................................................................................................... 15, 16

10 Cal. Corp. Code § 25503............................................................................................................... 15, 16, 17

11 Cal. Corp. Code § 25504............................................................................................................... 15, 17, 22

13 Securities Act § 12(a)(1), 15 U.S.C. § 77l(a)(1) ................................................................................ passim

14 Securities Act § 13, 15 U.S.C. § 77m. .......................................................................................... 6, 7, 9, 14

15 Securities Act § 2(a)(1), 15 U.S.C. § 77b(a)(1) ........................................................................................ 21

16 Securities Act § 3(a)(10), 15 U.S.C. § 78c(a)(10) .................................................................................... 21

19 Fed. R. Civ. P. 9(b) ............................................................................................................................ passim

20 Fed. R. Civ. P. 12(b)(6)....................................................................................................................... 1, 2, 4

1 MEMORANDUM OF POINTS AND AUTHORITIES

18 II. STATEMENT OF ISSUES TO BE DECIDED

22 distribution” or that Defendants were the “sellers” of the XRP he bought.

23 B. Whether Plaintiff’s California Corporations Code claims for unqualified securities

26 C. Whether Plaintiff’s misrepresentation claim (Count 4) must be dismissed because

1 statement compliant with Rule 9(b).

5 III. FACTUAL BACKGROUND

10 ¶ 15. Bradley Garlinghouse is Ripple’s CEO. Id. ¶ 16.

11 B. XRP and the XRP Ledger

18 while others owned the remaining 33 billion. Id. ¶ 26. 4

1 securities authorities, id. ¶¶ 1, 7.

2 C. XRP Sales, Including Plaintiff’s Alleged Purchases

22 IV. STANDARD OF REVIEW

14 when, where, and how” of the fraud. Id.

15 V. PLAINTIFF’S FEDERAL SECURITIES CLAIMS ARE BARRED BY THE STATUTE

6 2016. For example:

9 • “For example, in 2014, Ripple publicly stated on its www.ripplelabs.com/xrp-distribution/

17 3. Plaintiff’s Effort to Plead Around Section 13 Fails

16 insufficient, id., as it should here.

3 or intermediary.” Id. at *28.

20 (allegations that defendants provided information to securities analysts, employed underwriters,

23 D. Plaintiff Fails To State A Claim Under Section 15

5 VI. PLAINTIFF FAILS TO STATE ANY CLAIMS UNDER THE CALIFORNIA

14 transaction,” (b) directly from Defendants, or (c) “in this state.”

15 1. Plaintiff Fails To Allege An “Issuer Transaction”

27 2. Plaintiff Fails To Allege Privity With Defendants

4 4. Control Person Liability Is Unavailable Absent A Primary Violation

9 B. Plaintiff’s Misrepresentation Claim Fails (Count 4)

22 1. Plaintiff Fails To Allege Privity Or An In-State Transaction

5 communication” containing a misrepresentation and extends liability only to misrepresentations made

9 2018 WL 6842958, at *5 (C.D. Cal. Nov. 14, 2018) (emphasis added).

23 have been made in connection with those communications.”).

24 3. Plaintiff Fails To Allege An Actionable Misstatement Under Rule 9(b)

25 1162–63 (holding it “pointless and costly” to compel reprinting of public information).

7 statements about a technology product as “forward-looking, too vague to be actionable, or constitute

6 or where they were made, thus failing to satisfy Rule 9(b).

7 4. Plaintiff Cannot Sustain A Material Assistance Claim Under Section 25504.1