Ripple Labs to sue Kraken CEO?

When Ripple co-founder, Jesse Powell, announced he was resigning from Ripple’s board, he made the announcement on Reddit (see my post Ripple soap opera continues with board member’s resignation). Powell, who’s also the CEO of cryptocurrency exchange Kraken, probably wasn’t expecting his move to devolve into a potential lawsuit. But that looks exactly like what’s happening.

Powell made a new post on Reddit today titled “Ripple Attack Dogs Descend on Resigned Board Member,” where he posted a link to a letter he received from Ripple’s attorney George Frost. In the letter, the attorney demands that Powell “Cease and Desist and Retract Libel.”

From the alleged letter:

Your recent public statements regarding Ripple and its CEO, Chris Larsen, are false and defamatory and are clearly intended to damage the company. We cannot let this pass without a firm response. Moreover, you appear not to understand your obligations as a Ripple board member to protect the Company’s fundraising plans and other confidential information; instead, you are using your insider knowledge to sabotage Ripple Labs and wrest large payments for yourself and McCaleb.

The letter goes on to make a number of allegations against Powell including:

  • Powell falsely claimed Chris Larsen would not voluntarily return his enormous allotment of XRP.
  • Powell is presenting Ripple Labs as “controlled by corporate ‘suits.'”
  • Powell threatened the company with a firesale of Jed McCaleb’s XRP, which “would destroy the market price and disrupt a pending Ripple Labs financing round.”
  • Powell is in breach of his duties as a director and has mounted “tortuous interference in the Company’s fundraising efforts, with potentially disastrous consequences.”

The letter claims that if Powell does not recant his claims, he’ll face litigation:

“If you do not immediately publish the requested retraction and refrain from further tortuous interference in Ripple Lab’s upcoming fundraising effort, and cease making any further false and malicious comments about Ripple Labs, it’s officers, and its programs, we will take appropriate legal action against you. If Ripple Labs is forced to file suit to stop your wrongful conduct, it will also seek punitive damages, and an award of its attorney fees and litigation expenses.”

Rather than recanting his claims, Powell has instead publicly posted the letter from Ripple Labs interpolated with his responses in a Google Doc. Powell is very nonchalant about the threat of a lawsuit, which makes his side of the story seem convincing:

“I’ll post a retraction when I have public clarification from Chris on what his position is regarding the actual one-way trip of the XRP under his personal control back to the company. I can appreciate a lawyer who works weekends!”

He sums up his full thoughts at the end of the letter: “I don’t have any special relationship with Jed, I don’t know what he’s working on, I’m not involved in what he’s working on, and I’m unaware of any Ripple fork or competing effort. We’re not colluding and I’m not trying to attack or harm Ripple Labs.”

It’s getting very ugly. A public statement from Larsen about the arguments would be helpful. Without that, Ripple Labs seems to be in disarray, and it’s disheartening – particularly to the people who believe in the protocol and would like to see the technology succeed.

KEY UPDATE, 5/27/14: Ripple Labs has responded by saying that Chris Larsen has “authorized the creation of a foundation to distribute his donation of 7 billion XRP to the underbanked and financially underserved.” Ripple’s full response can be seen here.

Photo background credit: Dawn Hudson.

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  1. Ethan

    O_O Wow who would have seen this coming.. I just got some high school after-class brawl flashbacks haha.

    Larsen’s response and the (hopefully amicable) conclusion of this could be make or break for Ripple at least in the eyes of enthusiasts. If more people knew about Ripple the negative press would probably be much more damning.. then again if you lose your enthusiasts you may lose your chance at success.

    Fortunately I think the principal technology and team is strong enough that even if this draws out badly I believe there is still a good chance for it succeeding once this blows over. Just like when the Silk Road and Mt Gox news hit Bitcoin (and basically all cryptocurrencies).. it hurt perception and set things back even to this day, but the promise of the underlying technology keeps everything floating and slowly moving forward.

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