SEC targets XRP holders, Attorney John E. Deaton claims

Rick Steves

“I have said from day one, I am not an expert in crypto nor a securities lawyer, but 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. I hope that clarity is on the horizon, but I fear that for the retail holders represented in our case the fight has just begun.”

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John E. Deaton, Managing Partner at The Deaton Law Firm and lawyer for approximately 11,000 XRP holders in the context of the SEC v Ripple lawsuit, has stated that the regulator is misleading the court.

According to Mr. Deaton, the SEC is making a case against all XRP transactions from 2013 to the present day and this is was made clear in court during a March 12 hearing, where SEC prosecuting attorney Jorge Tenreiro said: “every sale is a violation.”

When pressed by Judge Netburn about every individual in the world who is selling XRP, Mr. Tenreiro said that retail holders of XRP are protected under the exemptions of Section 4 and only “the issuer” is a legal target.

“Well, we know that isn’t true. What is worse, the SEC also knows it isn’t true”, said XRP holders’ lawyer John E. Deaton, pointing to the case against Telegram, also ruled in the same U.S. District Court. The Judge’s order used the term “issuer” as every person who issues or proposes to issue any security. “That means any exchange who lists the token and any retail holder who sells it to someone else”, Mr. Deaton explained.

“Tenreiro’s attempt to mislead the court goes further. He was the lead attorney for the SEC in the Telegram case. He knows what he argued, and what the judge ultimately ruled in the case. He can’t claim ignorance in front of Judge Netburn, or any of us. We are watching the case closely and we are well aware of the stakes for us, as holders of XRP, but more broadly as holders of all cryptocurrencies. Make no mistake, what happens in this case will have a major impact on the future of crypto, at least in the U.S..”

“The absence of any protections granted or expressed for holders of XRP in the SEC’s complaint against Ripple was deliberate. If they wanted to reassure the millions of XRP holders, they would have done so at the beginning. To date, the SEC has not offered reassurance in any manner, not in Tenreiro’s response to Judge Netburn, not in their reply to our pre-motion letter, not anywhere”, he stated.

The fundraising scheme used by Telegram, which the SEC sought and received a preliminary injunction preventing the company from using the funds raised from selling Grams to build its TON Blockchain, is “strikingly similar to the offering scheme Vitalik Buterin used to launch Ethereum”, said Mr. Deaton.

“Also curiously, ex-SEC Director of Corporation Finance William Hinman made it clear that in his eyes ETH is not a security. So why then go after Telegram? Perhaps the $1.6 million in payments he received from a law firm that sits on the Ethereum Enterprise Alliance during his tenure at the SEC had something to do with it”, he accused as he further pointed the finger at the SEC.

“I have said from day one, I am not an expert in crypto nor a securities lawyer, but 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. I hope that clarity is on the horizon, but I fear that for the retail holders represented in our case the fight has just begun.”

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

“I feel incredibly privileged to join the SEC’s team of remarkable public servants. As Chair, every day I will be animated by our mission: protecting investors, facilitating capital formation, and promoting fair, orderly, and efficient markets. It is that mission that has helped make American capital markets the most robust in the world”, said Mr. Gensler.

Gensler was formerly chair of the U.S. Commodity Futures Trading Commission, leading the Obama Administration’s reform of the $400 trillion swaps market. Prior to his public service, Gensler worked at Goldman Sachs, where he became a partner in the Mergers & Acquisition department, headed the firm’s Media Group, led fixed income & currency trading in Asia, and was co-head of Finance, responsible for the firm’s worldwide Controllers and Treasury efforts.

Described as “one of the leading reformers after the financial crisis”, Gary Gensler will now lead the SEC in a time of crisis. The financial watchdog has been under fire for not providing clarity regarding its authority over the cryptocurrency ecosystem, with the most recent scandal being the SEC v Ripple lawsuit.

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”.

Mr. Garlinghouse has stated that he’s hopeful that the case against them could be reviewed once Gary Gensler steps in to take charge of the SEC.

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

The motion to dismiss the complaint against the co-founders of Ripple Labs follows a string of wins for the defendants, the most recent being Judge Sarah Netburn granting the defendants’ motion to reject the SEC’s access to eight years of co-founders Garlinghouse and Larsen’s personal information.

A significant win for the cryptocurrency firm was determined in April 6. U.S. Magistrate Judge Sarah Netburn ruled in favor of granting Ripple Labs access to the SEC internal discussions over cryptocurrencies.

In March, Judge Torres 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.” The statement admits to XRP’s utility and currency value.

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