SEC against potential “avalanche” of claims if XRP holders intervene
The SEC calls for the rejection of the Movants’ proposed intervention as their “ultimate goal in seeking to intervene is for XRP to become available again for trading on digital asset platforms so that Movants may buy and sell XRP as a speculative investment”.
The SEC has sent a letter to Judge Analisa Torres in response to the March 19 letter from the XRP community who seeks to move to intervene in the lawsuit.
In the letter to the Southern District of New York Judge, the regulator first points out that the “movants” don’t explain what claims they would assert against whom in this action if an intervention took place.
The financial watchdog also claims “Congress has barred by statute the consolidation or coordination of claims without the SEC’s consent, and sovereign immunity bars Movants’ claims against the SEC”.
The SEC calls for the rejection of the Movants’ proposed intervention as their “ultimate goal in seeking to intervene is for XRP to become available again for trading on digital asset platforms so that Movants may buy and sell XRP as a speculative investment”.
XRP holders’ letter does note investor losses due to the delisting and/or halting of XRP from cryptocurrency exchanges, which proves “that Defendants offered and sold XRP as a speculative investment, but an improper basis to seek to intervene in this case”, the SEC stated, adding that the defendants are already making the arguments Movants want to advance.
“Moreover, if the Court permitted Movants to intervene, all other XRP holders, including a large class of XRP investors who has already sued Defendant Ripple Labs, Inc. (“Ripple”) for unregistered offers and sales of XRP securities, would likely seek to intervene, too. Intervention would thus create an “avalanche” of claims and “near-certainty of undue delay, complexity and confusion”, the SEC concluded.
The defendants (Ripple, Brad Bradley Garlinghouse, and Christian A. Larsen) also sent a letter to the Judge in response to the XRP holders’ call to intervene.
According to the letter, the intervenors are correct that the SEC’s amended complaint fails to explain their case on whether XRP is a security or not.
“Given this ambiguity, and the potential precedential impact of this litigation on non-parties, Defendants agree that Intervenors should be permitted to proceed with their motion to clarify this point”, the letter from Ripple, CEO Brad Garlinghouse, and co-founder Christian A. Larsen stated.
FinanceFeeds has recently reported on Attorney Jeremy Hogan’s comments regarding a recent court session, where the Judge dropped a “bombshell”.
“My understanding about XRP is that not only does it have a currency value but it has a Utility and that utility distinguishes it from Bitcoin and Ether”, which may suggest she does not view it as a security.
The Judge also questioned the SEC attorney that, based on his theory, “everyone who sold XRP – including you and me – are selling illegal securities”. The SEC lawyer said, “no, under Section 4, only Ripple and affiliates of Ripple can have sold XRP illegally”.
This statement from the SEC lawyer clears the way for the cryptocurrency exchanges in the United States to re-list XRP again with no fear of reprisal.
The lawsuit against Ripple alleges co-founders aided and abetted Ripple’s unregistered sales of securities, dating as far back as 2013 and 2015 respectively.
In its answer, Ripple stated it had “never offered or sold XRP as an investment” and that “XRP holders do not acquire any claim to the assets of Ripple, hold any ownership interest in Ripple, or have any entitlement to share in Ripple’s future profits.”
The SEC vs Ripple lawsuit may hamper the firm in the race for CBDCs. Ripple has recently released a white paper making its case for the XRP private ledger as a bridge for central bank digital currencies.
It is unclear if Ripple is addressing central banks with its white paper as a way to put pressure on the ongoing legal battle with the SEC. Either way, central banks may hesitate to work with Ripple at this particular time.
More so if they lose the case and the firm becomes overwhelmed with private legal claims. Too much uncertainty to deal with while competitors get in line for attention from central banks, including R3’s Corda, Ethereum, Stellar, Hedera, and eftpos.
Ripple, though, has already got France’s attention and the European Central Bank is planning to launch the digital euro within the next five years. ECB’s Panetta has proposed a threshold of €3,000 for every citizen.
The creator of the XRP ledger can still get around the legal issues and work with central banks by setting up a separate company or subsidiary. Being open-source, the ledger can always be used by any interested party, but without the privacy settings offered in its recently announced CBDC Private Ledger.
