Ripple CEO Brad Garlinghouse appeared on Axios to call the Securities and Exchange Commission (SEC) lawsuit against his firm misguided.
Speaking on HBO’s Axios news series, Garlinghouse appeared in good spirits. Referencing the SEC’s non-action over an eight-year period, he even laughing at interviewer Dan Primack’s joke on no give-backs as a defense strategy.
Garlinghouse outlines Ripple’s defense
The SEC filed a lawsuit against Ripple in mid-December 2020 over allegations it, CEO Brad Garlinghouse, and Chairman Chris Larsen were involved in selling an unregistered security in the XRP token.
Although the immediate aftermath saw massive sell pressure, tanking Ripple’s market cap from $27bn to $9bn a week later, XRP has staged a recovery of sorts. Currently, its market cap is close to pre-lawsuit levels at $21bn.
Nonetheless, the damage was done. Especially as the announcement’s timing came during Bitcoin’s break of its three-year resistance at $20k. While the likes of Cardano and Polkadot rode with Bitcoin’s ascent, XRP remained somewhat stagnant, sliding down the market cap rankings as a result.
Speaking about the situation, Garlinghouse remained steadfast in his view that XRP is not a security. He addressed the point by saying ownership of XRP does not give ownership rights in Ripple.
“If you own a security it gives you ownership of a company, right? If Ripple goes away XRP is going to keep trading.”
Garlinghouse also mentioned that the U.S. is the only country in the world that claims that XRP is a security.
“Many countries around the world, the U.K., Japan, Switzerland, Singapore, they all have clarity and certainty that XRP is not a security. In fact, the United States is the only country on the planet that has suggested that XRP is security…”
Motion to dismiss filed with Judge Torres
Last week, Ripple’s legal team filed a motion to dismiss, saying the case represents regulatory overreach. As the term suggests, the defense is requesting Judge Analisa Torres dismiss the plaintiff’s case.
The letter picks apart the SEC claim, particularly its interpretation of the Howey ruling as it relates to Ripple’s lawsuit. It claims retail investors purchased XRP through secondary exchanges. This means no investment contract exists between Ripple and retail investors.
Garlinghouse also mentioned that any sales he conducted were anonymous, and proceeds not pooled with other investors, making the SEC’s common enterprise argument invalid. As well as that, and perhaps the most tenuous point, Ripple claims the XRP price is correlated with Bitcoin and other cryptocurrencies, and not on their efforts in promoting it.
However, the SEC’s biggest hurdle lies in convincing the judge that the sales took place in the United States. The fact they occurred worldwide is a plus for Ripple’s defense.
Court Orders SEC to Answer Ripple’s Interrogatories
Ripple, however, has failed to bury the SEC in paperwork, with the judge granting the agency’s motion for a protection order against “unduly burdensome” requests
Magistrate Judge Sarah Netburn has ordered the U.S. Securities and Exchange Commission to answer some of Ripple’s hotly-contested interrogatories, which are meant to determine whether or not the plaintiff’s contentions can be supported by facts.
The agency will have to specify why the company’s XRP sales are investment contracts:
The SEC’s legal theory is not an excuse to avoid responding to Defendants’ factual inquiry. Nor is it a basis to answer a different question than posed.
In addition, the SEC will have to state whether it believes that Ripple’s efforts were key to boosting the price of XRP.
However, Ripple’s interrogatory about whether or not the XRP Ledger was fully functional prior to the start of the securities offering has been denied for being too vague:
The Court agrees that this interrogatory seeks relevant information. But Defendants’ interrogatory is too vague for the reasons identified by the SEC.
Netburn has also granted the SEC’s motion for a protective order, which allows the regulator not to respond to all of Ripple’s “unreasonably burdensome” interrogatories.
The agency claimed that covering all the 29,947 requests would take 104 days without “breaks or sleep.”
Earlier this week, the court also granted the SEC’s motion to extend the expert discovery deadline to Jan. 14, 2022, despite Ripple’s protestations.
Ripple CEO Says the SEC Helped Ethereum to Surpass XRP as No.2 Crypto
- Ripple CEO aired his opinion on the crypto market and regulations.
- Brad Garlinghouse said the US SEC granted Ethereum regulatory green light.
At the DC Fintech Week virtual conference on October 21, Ripple CEO Brad Garlinghounse aired his thoughts on the state of the crypto market and regulations. Besides, he holds a grudge over the financial regulator’s approach to Ethereum.
In addition, Garlinghouse declared that the US Security and Exchange Commission (SEC) granted Ethereum regulatory green light that enabled it to surpass his firm’s XRP token.
Likewise, the Ripple boss feels that his firm has been played out. But, at the same time, Ethereum’s subsequent success is at least in part down to more favorable treatment by the US SEC. Also, Garlinghouse stated that it is affecting its market. He said,
“Within the last few years, XRP was the second most valuable digital asset. As it became clear the SEC had given a hall pass to ETH, ETH obviously has exploded, and that clarity has helped.”
To clarify, XRP was the second-largest crypto asset by market cap in late December 2017. But, currently, it has dropped to seventh place while Ethereum has kept the second spot ever since.
Furthermore, the reason why XRP dropped is the US SEC pursuing Ripple over claims that XRP is unregistered security. In fact, in January, Ripple filed a Freedom of Information Act request with the US SEC demanding to know why it didn’t consider ETH security.
As a result, later in July, a district judge allowed the firm to depose a former official who declared in 2018 that ETH was not a security.
Ripple CEO reinstates SEC bias towards ETH, claiming XRP could’ve been No.2
It is not news that the ongoing XRP lawsuit has got the better of Ripple’s XRP token. Ripple CEO, Brad Garlinghouse recently questioned the SEC’s bias towards Ethereum, claiming that XRP would’ve been at the No. 2 position instead of ETH if it weren’t for the commission’s partial crackdown. Garlinghouse spoke at the DC Fintech Week virtual conference yesterday, arguing that the U.S. Securities and Exchange Commission alleged Ripple’s XRP as unregistered security while granting Ethereum a regulatory free pass, which in turn helped ETH shoot through the roof.
“Within the last few years, XRP was the second most valuable digital asset. As it became clear the SEC had given a hall pass to ETH, ETH obviously has kind of exploded and that clarity has helped.”
XRP secured the position of the second-largest crypto asset by market capitalization during the latter half of 2017. However, the token has dropped down to seventh place while Ethereum stands strong as No. 2. Furthermore, Garlinghouse claims that the SEC’s exclusively aggressive anti-crypto stance to allegedly protect the consumers is in fact anti-investors. Referring to the XRP lawsuit, Ripple CEO emphasizes that “nearly 50,000 U.S. people who hold XRP who are trying to sue the SEC for ‘protecting them’”.
XRP Holders left with bearish and frozen funds
Earlier this week, Attorney Deaton Filed a Letter Motion on behalf of the XRP Holders (Movants) that contended SEC’s extension request, with the main argument concerning the XRP holders’ frozen funds because of the consistent postponement of the lawsuit’s final verdict. During the ongoing bull run, XRP remains considerably bear because of the regulatory crackdown on Ripple. However, the court has overlooked the community’s concern and granted the extension explaining that in lieu of pending motions, extra time will only facilitate both parties to complete pending fact discovery and thoroughly prepare for upcoming expert depositions.
“The lack of liquidity within the United States, coupled with the mass de-listings prevents XRP Holders from trading, selling, transferring, or converting their XRP. It is because of this de facto in place seizure of their property that XRP Holders took the extraordinary step to seek intervention as defendants… Any delay in the underlying action marks yet another day XRP Holders do not have access to their funds.”, wrote Deaton.