- The SEC’s attempt to support its Motion to Strike the Fair Notice defense by Ripple was turned down.
- Proponents rule the regulator’s move as a delay tactic, while lawyer Deaton details why he believes the commission is bound to lose.
On Feb. 23, the US Securities and Exchange Commission (SEC) filed a ‘Sur-Sur-Reply’ to Ripple Inc.’s Feb. 10 sur-reply on the “fair notice” defense. Essentially, the regulator wants to strengthen its claim on why the court should rule in favor of its Motion to Strike the defendant’s fair notice defense. The latter is a claim by Ripple that the SEC deliberately failed to notify it of its judgment of XRP as a security.
According to Ripple and XRP proponents, the latest move by the regulator is a delay tactic. Additionally, Ripple’s team of lawyers believe the SEC is misleading the public on its previous classification of cryptocurrencies.
In its latest update, the SEC attempted to introduce new material and argument based on the pre-decided case of SEC v. LBRY. However, according to James Filan, a defense lawyer, and Ripple proponent, the case is irrelevant since it is “unrelated” to Ripple’s lawsuit. Moreover, Ripple supporters say a trial would have led to a different outcome of the case referred to by the SEC.
Unfortunately for the regulator, District Judge Analisa Torres turned down the SEC’s motion with a one-word reply: “Denied.” In response, John Deaton, an attorney representing XRP holders in the case, tweeted:
The case against @bgarlinghouse and @chrislarsensf is OVER. It was over the day it was filed.
The bigger picture on SEC v. Ripple lawsuit
According to Deaton, the commission needs to prove that Ripple executives – Brad Garlinghouse and Chris Larsen – had actual knowledge of XRP being a security, or that they were recklessly and ignorant on the same. It also needs to show that its rules at the time were obvious in judging XRP as a security.
However, Deaton says the SEC cannot do so for various reasons. Perkins Coie, the law firm that took part in drafting the famous Hinman speech, concluded in a 2012 memo that XRP was not a security. The SEC also allowed its employees to freely trade and own cryptocurrencies, including XRP, until 2018. In the same year, both SEC lawyers and its top officials fail to classify XRP as a security.
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The 2018 Hinman speech ruled out Ethereum being secure due to its decentralized nature. About this, Deaton says XRP is just as decentralized if not more, hence a non-security.
Additionally, Coinbase informed the SEC in Jan. 2019 that it did not think XRP was a security. The following month, the exchange proceeded to list the token without any resistance by the regulator. The case was the same for financial investment firm Bailard Inc. The firm in Jan. 2020, made an ethics declaration with the SEC that it “would only trade digital assets generally accepted in the financial industry as non-securities: BTC, ETH, and XRP.” MoneyGram was also allowed to sell XRP to retail holders through exchanges.