XRPL COURT CASES 06-55: Cress v. Nexo Fin. 23-cv-00882-TSH (N.D. Cal. Oct. 10, 2023)

  

Cress v. Nexo Fin.

23-cv-00882-TSH (N.D. Cal. Oct. 10, 2023)

This Court finds that, to the extent that Cress's UCL claims are based on Nexo's deceptive conduct in the sale of NEXO Tokens and his Earn Account, these claims are barred under Bowen. As to allegations related to borrowing from Nexo, the Court finds that these claims may proceed. Nexo argues that because Cress has alleged that essentially all of his assets with Nexo were securities that he is barred from proceeding with the UCL claim regardless of whether they are determined to be securities or not. ECF No. 25 at 11. Nexo cites to no caselaw in support of this proposition, and the Court finds that Cress could proceed with a UCL claim in the alternative to the security fraud claims based on the “Leveraged Investment Instrument.” See Zakinov v. Ripple Labs, Inc., No. 18-CV-06753-PJH, 2020 WL 922815, at *23 (N.D. Cal. Feb. 26, 2020) (“In the event XRP were factually determined not to be a security (like any other non-security good subject to California consumer protection statutes) and plaintiff alleged the above referenced misstatements with requisite Rule 9(b) specificity, those statements may still be actionable under § 17200 or § 17500 under, for example, a theory of false advertising.”) (emphasis in original). Further, as described below, the Court does not find at the moment that Cress has adequately pled that his “Leveraged Investment Instrument” is a security and thus he currently has no claim related to securities transactions in borrowing with Nexo. In the event he amends his Complaint to allege that the Leveraged Investment Instrument is a security, he may also allege his UCL claim related to the sale and purchase of the Leveraged Investment Instrument in the alternative. See id.