SEC raises eyebrows for “defending” ex-Chairman from Ripple

Rick Steves

The SEC’s decision to step up to protest against a subpoena on a third-party is raising eyebrows, particularly among the XRP community. John E. Deaton, lawyer for approximately 11,000 XRP holders, tweeted his outrage.

On March 31, Ripple Labs served a subpoena to “produce documents, information, or objects” on One River Asset Management, which hired ex-SEC Chairman Jay Clayton as an advisor.

Mr. Clayton was head of the Securities and Exchange Commission when the regulator filed the complaint against Ripple Labs and its co-founders for an alleged illegal securities offering, which implicitly suggests that XRP is a security and under the scope of the SEC.

Ripple’s subpoena was issued in the context of the SEC v Ripple lawsuit and the financial watchdog has decided to formally protest against it in court.

“Defendants served a third-party subpoena for documents relating to Former Chair Clayton’s compensation after his tenure at the SEC […] Ripple explained that because the targeted firm invested exclusively in Bitcoin and ether, this request was probative to the “financial motivation” of the “decision-makers” involved in the decision to bring this action.

“But this action was approved by a vote of the full Commission and it is difficult to fathom how discovery of an individual Commissioner’s finances is in any way appropriate under the Federal Rules of Civil Procedure, particularly when the Court has already ruled that there is no need to produce bank records of the Defendants in this case who made hundreds of millions of dollars from an illegal offering of securities.”

The SEC’s decision to step up to protest against a subpoena on a third-party is raising eyebrows, particularly among the XRP community. John E. Deaton, lawyer for approximately 11,000 XRP holders, tweeted his outrage:

“Why would the @SEC_Enforcement object or get involved in this subpoena? Clayton and his new employer are part of the private sector. @Ripple served a subpoena on them. I’m pretty sure that One River has lawyers that can move to quash the subpoena.”

“It’s about the same issue that the judge said is relevant – it’s only asking a third party to provide what’s in their possession. Maybe Clayton sent emails from a private email account. It is absolutely appropriate to ask for this and it’s consistent with the judge’s ruling”, he stated.

“So why in the world would the SEC defend against a subpoena issued on a third party? It’s their fight not the SEC’s fight. US TAXPAYERS ARE NOW DEFENDING ONE RIVER. WTH is the SEC afraid will be discovered? It’s shameful and on its face appears conspiratorial.”

In the context of the SEC’s lack of clarity, Mr. Deaton had previously said it “doesn’t take an expert to see that plenty is very wrong, very corrupt and very outrageous about the SEC’s lawsuit against Ripple”.

He has recently published an op-ed stating his belief that the regulator is misleading the court as it secretly targets all XRP holders with its SEC v Ripple lawsuit.

John E. Deaton’s published the accusatory text against the SEC as the regulator welcomes Gary Gensler as its new Chair.

Not only the regulator is being attacked for having filed the complaint the day before Chairman Jay Clayton left his position, but for accusing Ripple’s co-founders of bad faith while also being unclear about the security status of XRP, in what Brad Garlinghouse called “ironic”.

Brad Garlinghouse and Chris Larsen, Ripple’s co-founders, have recently filed twin motions to dismiss the case against them.

CFTC eyes SEC v Ripple for regulatory clarity

A few days ago, CFTC Commissioner Stump has expressed the CFTC’s attention to the lawsuit filed by the SEC against Ripple Labs and its co-founders for having sold more than 14.6 billion XRP tokens worth $1.38 billion in an unregistered offering, according to the complaint.

“The question of whether XRP is a security will be crucial. XRP is similar to bitcoin and other digital assets but also different in key respects, which prompted the SEC’s investigation. Bitcoin was an open software project launched by a pseudonymous creator calling himself Satoshi Nakamoto. XRP was created, sold initially, and backed by the company known as Ripple.

“I am watching the outcome of this case closely because it will help to establish the scope of the SEC’s authority in the digital assets space”, Commissioner Stump said, drawing attention to SEC Commissioner Hester Peirce’s work regarding the application of the “Howey test” to digital assets, which provides the framework for determining whether certain assets are securities.

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