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U.S. blockchain startups R3 and Ripple in legal battle
September 8, 2017 / 5:33 PM / 13 days ago

U.S. blockchain startups R3 and Ripple in legal battle

Servers for data storage are seen at Advania's Thor Data Center in Hafnarfjordur, Iceland August 7, 2015. REUTERS/Sigtryggur Ari/File Photo

NEW YORK (Reuters) - U.S. blockchain startups R3 Holdco LLC and Ripple Labs Inc are suing each other over an options contract to purchase Ripple’s digital currency XRP, according to lawsuits filed on Friday.

In September 2016, the two companies entered an agreement giving R3 the right to purchase up to 5 billion XRPs for $0.0085 per unit until September 2019, according to a lawsuit filed by R3 in the Delaware Chancery Court on Friday.

In June 2017 Ripple’s Chief Executive Brad Garlinghouse attempted to terminate the options contract through an email to R3’s Chief Executive David Rutter, according to the R3 lawsuit.

R3 alleges that the contract does not give Ripple the right to terminate it unilaterally and is asking the court to declare that it is entitled to all its rights, including purchasing the XRP anytime over the next two years.

Both R3 and Ripple develop blockchain technology for banks and other financial institutions and had entered the options agreement during discussions about potential collaborations, according to the lawsuit.

Ripple responded by filing its own lawsuit against R3 in a California state court in San Francisco later on Friday.

Ripple’s lawsuit alleges that the company terminated its agreement because R3 had failed to deliver on another parallel technology partnership agreement to give Ripple access to its network of banks and help promote its technology. It asks the court to declare that the agreements are invalid and order R3 to pay damages in an amount to be determined at trial.

XRP, which is a virtual currency that is traded against the U.S. dollar on cryptocurrency exchanges online, has soared in value to $0.20 since the companies entered the options agreement, according to CoinMarketCap.com. This would make the option contract worth more than $1 billion.

“Our filing is straightforward - R3 misrepresented their ability and intent to deliver on their commitments,” a Ripple spokeswoman said in a statement. “Given XRP’s ~4000 percent increase over the course of the year, R3 suddenly wants to tap into the value of XRP, though the facts are clear that they did not earn any option based on our agreement.”

The lawsuit comes as the value of cryptocurrencies such as XRP and bitcoin continues to rise. Bitcoin, one of the oldest and most established cryptocurrencies has more than quadrupled in value since December to over $4300.

Blockchain, which is best known as the system underpinning bitcoin, is a public online ledger of transactions maintained by a network of computers on the internet. Financial firms hope that the nascent technology can reduce the cost and complexity of burdensome processes such as international payments and securities settlement.

R3 launched in September 2015 with the backing of nine of the world’s largest investment bank and its membership has rapidly grown to about 80 financial institutions. In May it raised $107 million from companies including Bank of America Corp (BAC.N), SBI Holdings Inc, HSBC Holdings Plc (HSBA.L) , Intel Corp (INTC.O) and Temasek Holdings. Thomson Reuters is a member of the consortium.

Ripple, which focuses on blockchain-based cross border payments, works with many large banks and is backed by firms including Standard Chartered Plc (STAN.L), Accenture Plc (ACN.N), and SBI Holdings.

Reporting by Anna Irrera; editing by Clive McKeef

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