A decision made back in 2016 by former Ripple boss Chris Larsen causing a rift between him and the company took another twist this week. A deal was signed with a bank consortium which included an option for its partner to buy 5 million tokens at when they were valued at a pittance. Ripple has countersued, claiming the deal was made in bad faith.
Following the meteoric price rise of XRP in the past month that contract is now worth $ 12 billion and both sides are locked in a courtroom battle that could influence the future of the company and its digital currency.
Ripple filed a counterclaim this week in a New York state court with accusations that the R3 consortium signed the deal in bad faith according to Fortune. The San Francisco blockchain company also claims that R3 used the partnership to leech expertise and develop a competing product. The filing includes emails from R3 CEO and represents almost 10% of the company’s 55 billion XRP allocated from the 100 billion total.
The filing claims that Ripple does not need to honor the contract as the consortium failed to hold up its end of the deal which was to sign Ripple up with a bank. It also claims insider knowledge that R3 knew both JP Morgan Chase and Goldman Sachs were pulling out of the consortium.
A key paragraph in the countersuit states:
Rather, R3 had misrepresented its resources and current ability to perform solely to induce Ripple into executing the Agreements. For example, although R3 represented to Ripple that it would have access to its large consortium of leading banks, R3 knew and had reason to know that several key banks that would be instrumental to Ripple’s success would soon be departing from its consortium.
In R3’s complaint, it claims a decision by Ripple last June to terminate the option was unjustified, and the real motive behind the decision was related to XRP’s sudden increase in value.
Banks are betting that blockchain technology will ultimately replace the slow and costly existing methods of fund transfers. Ripple offers its own solution in XRP but many of the banks want full control and are developing their own blockchains, such as R3’s Corda platform.
XRP has fallen heavily in the past few weeks from an all-time high of $ 3.80 down over 33% to $ 2.53 where it currently trades at the time of writing. It is currently the third largest cryptocurrency with a market capacity of just under $ 100 billion according to Livecoinwatch.
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