The court with jurisdiction over the Ripple Labs vs. Tetragon litigation has issued a temporary restraining order limiting XRP sales.
Ripple is prohibited from trading XRP to the extent that it must have a zero balance.
According to a report by QLaw360, the Delaware Court of Chancery has issued a preliminary restraining order against Ripple Labs. The court’s order restricts the company from conducting XRP transactions and redeeming shares. Specifically, the court prohibits Ripple from trading XRP to the extent that it must have a zero balance. The order will remain in effect until “Tetragon can sell back its shares.”
As XRP community member “WrathofKahneman” reported first via Twitter, the vice chancellor said she viewed Tetragon’s requests for a complete ban on XRP purchases as potentially “heavy-handed.” Instead, the court ordered Ripple to maintain a “net zero” position in sales and purchases of XRP, rather than halting acquisitions outright.” The argument seems to be that Ripple is in a place to repay any stock value losses, so hold on until the SEC ruling.
As reported by CNF, Ripple Labs was sued by the SEC for selling XRP as a security without registering it. Subsequently, Tetragon Financial Group LTD, a UK-based asset management firm, also sued Ripple and demanded to buy back its shares. The firm was the largest contributor to a Series C funding round and holds $175 million of Series C shares which make up for less than 2% of Ripple’s equity.
Tetragon filed a preliminary injunction on Jan, 7th due to a clause that obliges Ripple to return the shares if XRP is classified as a security. In the motion, Tetragon sought an injunction that would prevent Ripple from using legally available cash or other liquid assets for any purpose other than to redeem Tetragon’s fully paid Series C preferred stock.
Reasons for Tetragon’s lawsuit against Ripple
However, Tetragon seems to be ahead of the results of the SEC’s lawsuit against Ripple. Tetragon expects that the lawsuit against Ripple Labs will affect the value of the company’s shares. Therefore, the company stated the following about the reason for its lawsuit:
Seeking for quick redemption before the plug is pulled out of the bathtub and value starts to go down the drain.
Kahneman also provided some additional facts about the reasons for Tetragon’s lawsuit. In addition to the decline in value of the shares, the company argues that the “Wells announcement” by the SEC was a sufficient signal to redeem the shares. Tetragon also admitted that Ripple has the resources to pay back the amount many times over.
Moreover, the UK-based company supposedly received a lawsuit threat from Ripple to discourage them from suing. In addition, the Vice Chancellor said she would schedule a preliminary injunction hearing for February and, if necessary, a one- or two-day hearing in March on the lawsuit.