It was a shock and awe operation that ruined Christmas for many. Right before the festive season 2020, within the last hours of the old SEC administration being in office, then-chair Jay Clayton gave green light to legal proceedings against U.S. startup Ripple. The allegation: billions were made illegally with the sale of non-registered securities.

The price of the digital token XRP at the heart of the allegation, which is key to Ripple’s vision to build the Internet of Value (IoV), crashed. It was never easy to hold XRP. The SEC action was a last test for many die-hard XRP holders. Many got flushed out, only for the token to make a strong recovery soon after, thereby demonstrating its strong fundamentals.

Since then, a whole new movement making the case for XRP as a digital asset with function and utility has grown. Lawyer John E. Deaton leads a pro bono class action of XRP holders against the SEC while fellow lawyer Jeremy Hogan has clearly established himself as the XRP community’s most favorite case observer.

SEC entangled in contradictions

Looking back four months later after the SEC filing, the government agency’s case against Ripple turns out to be a godsend. Not only do the SEC enforcers find themselves entangled in contradictions and untenable allegations. Contradictions such as filing cases against Ripple execs Chris Larsen and Brad Garlinghouse for selling XRP as securities, while SEC lawyers admit themselves they have no clue whether XRP is a security.

The last-minute, hasty, arbitrary, flawed and even personal SEC actions come back at them with a vengeance. America’s most renowned business and financial publications start to weigh in how disturbing the SEC actions seem. The Wall Street Journal calls it the SEC’s “confusion” which “harms investors by filing suits before setting clear rules”.

A next step for the SEC should be to recognize the harm of its current ad hoc approach. Investors and developers deserve to know whether their actions in the market are legal before they read news of the latest SEC lawsuit.


Reputable Bloomberg quotes a lawyer who calls the enforcement action “a mistake,” with the author “calling on the SEC to drop the suit.” The new SEC chairman Gary Gensler, it is said, has an important opportunity to undo actions taken in the waning hours of the Trump administration that threaten cryptocurrency innovation:

Though misguided, the SEC attack on Ripple presents a promising opportunity for the Biden administration. Under new leadership, the SEC could course-correct back to its mission to protect investors, while fostering fair and efficient markets, rather than interfering with currencies outside its jurisdiction. Gensler has a solid understanding of blockchain technology, and he could usher in fresh start on cryptocurrency by dismissing the case against Ripple. Rather than fight the cryptocurrency industry, Gensler should collaborate with them, and work toward the shared goal to safeguard the future of crypto, and America’s place within it.

Bloomberg Law

Forbes writes “the SEC is now on trial – and knows it” – and hints that those responsible for the SEC’s “dishonest” action should be investigated:

It was extremely shortsighted of the SEC to handicap Ripple at a time when the U.S. needs every American crypto leader on board to compete with China. Moreover, the case seems to reveal that former SEC leaders put their personal gain above the well-being of the nation.


The tide is turning

Don’t be surprised if the U.S. Department of Justice starts to investigate this whole mess. Not only did former SEC-chair Clayton and fellow commissioner William Hinman have clear ties to Ripple competitors while in office. The conflicts of interest are stunning. The did not even try to hide their white-collar profiteering, as if it were business as usual in these high levels of government.

The Ripple case threatens to tarnish the SEC’s reputation beyond repair. With it the future of all cryptocurrency projects in the U.S. is at stake. If the bullying of the SEC gets its way, then they will go after the rest of this still nascent industry. But the tide is turning.

The SEC action is backfiring dramatically, the mighty agency stands with its back to the wall. Face-saving exit scenarios might be drafted as we speak. It seems only a matter of when, and not if, that Ripple emerges handsomely strengthened and with regulatory clarity from this whole mess.

+ + +

It’s not that Ripple never engaged with the regulators – on the contrary: Ripple’s chief technology officer David Schwartz predicted in 2019 exactly what the SEC ended up doing: