In the summer of 2016, Ripple’s former CEO Chris Larsen made a fateful decision: he signed a deal with a bank consortium R3, that included an option for its partner to buy 5 billion units of its currency for less than a penny. Today, amidst a boom that made Ripple the world’s second most valuable cryptocurrency after bitcoin, that option contract is worth at least $12 billion and the two sides are locked in a bitter court-fight that could shape the future of global banking.
In the latest twist in the legal battle, Ripple filed a counterclaim in New York state court that accuses R3 of signing the deal in bad faith, and using the partnership to steal its expertise in order to develop a competing product. The new filing, which includes emails from R3 CEO David Rutter, comes at a time of intense interest in Ripple’s currency—known as XRP—by speculators, who pushed it to highs of around $3.50 last week.
The rise of XRP, which now trading around $2.50, has also made Larsen one of the richest men in the world. The option contract represents nearly 10% of the approximately 55 billion XRP (out of a total supply of 100 billion) currently controlled by Ripple.
This puts the stakes of the dispute on par with other epic early-days battles such as the one between Facebook’s Mark Zuckerberg and the Winkelvoss twins. In its counter-claim against R3, Ripple says it should not have to honor the options contract—in part because its partner failed to uphold its end of the bargain, failing to “assist Ripple sign up a single bank.” It also says the contract is invalid because CEO David Rutter knew financial heavy-weights Goldman Sachs, J.P.
Morgan, and Morgan Stanley were pulling out of R3, but failed to inform Ripple. Here is a key paragraph: Rather, R3 had misrepresented its resources and current ability to perform solely to induce Ripple into executing the Agreements. Read more from fortune.com…
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