On March 3, a letter on behalf of Bradley Garlinghouse, executive director of Ripple, was presented to the United States District Judge, Analisa Torres. The brief contains a motion to dismiss the lawsuit filed against it by the Securities and Exchange Commission (SEC) of that country.
In December 2020, the company Ripple and its founders were sued by the SEC because of the million dollar sales of its cryptocurrency XRP. Garlinghouse’s attorney claims the allegations are a regulatory overreach. In the letter, he maintains that the SEC’s allegations, which consider XRP as a security ( security ), are wrong.
XRP is not a security but a cryptocurrency, says Ripple
The text states that XRP has very different characteristics than a security . It ensures that, to enter that category, there should be a contract to form a “joint venture” between Ripple and XRP buyers. However, the XRP sales did not involve any type of contract since, they say, “they were made anonymously through an exchange.”
It should be noted that most exchanges comply with a rigorous registration process, which requires complete information from users. In this case, XRP trading anonymously refers to traders not knowing precisely which particular individual is selling to them, so there was no type of contract between Ripple and the buyers.
It also states that the value of XRP historically is not related to Ripple’s public announcements but rather to changes in other digital assets such as bitcoin and ether, publicly discarded as securities by the SEC.
However, very often, news involving Ripple directly and almost immediately affects the price of XRP. An example is the fall of almost 50% precisely after this lawsuit was made known in the media.
In addition, the letter objects that in 2015 and again in 2020, the Department of Justice and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) rated XRP as a cryptocurrency.
The CEO of Ripple declares not to have violated any law
The SEC also denounced Garlinghouse for personally violating securities laws, both for selling his own XRP holdings and for inciting the sale. This, asserts the defendant in the motion , “is an abuse on the part of the prosecutor because the SEC cannot demonstrate the malicious intent of the defendant.”
In addition, the letter says, “now the SEC has to show that Mr. Garlinghouse knew or recklessly ignored that he was associating himself with something inappropriate and still helped substantially to Ripple to commit an infringement. ”
The letter continues“ the best the SEC can do is allege that Mr. Garlinghouse was generally aware of the risk that some digital assets may be considered securities , but that he worked hard to make sure XRP didn’t even appear to have those characteristics. ”
Garlinghouse says the SEC cannot confirm that he was aware that a cryptocurrency could be considered a security. The letter also states that the vast majority of Garlinghouse’s XRP sales were made on foreign exchanges , and those transactions were not may violate United States federal securities laws.
At this point in the lawsuit there are 4 possible outcomes, according to Orlando, United States attorney Jeremy Hogan: Settlement, successful motion to dismiss the trial, summary (the judge decides the outcome) or a jury trial. In the opinion of this defender, the letter has a great chance of dismissing the process. Mainly because of the argument that the SEC cannot demonstrate the malicious intent of the defendant at the time of selling XRP.
We can note that this lawyer has commented on the Ripple lawsuit case since its inception. His publications on social networks imply that he sympathizes with the defendant.
CriptoNoticias has followed up on this case from the beginning, showing the full picture and reporting the consequences of this case so far . A noteworthy move was the resignation of SEC Chairman Jay Clayton, who maintained a clear stance against cryptocurrencies, hours after the signing of the lawsuit against Ripple.