March 10, 2021 / Business
SEC Calls Ripple Defense Arguments As “Legally Insolvent”
The regulator considers the protection of Ripple “illegal from a legal point of view” and asks the court not to delay the trial.
The US Securities and Exchange Commission (SEC) asked the court to reject the arguments of the defense of Ripple and the motion of its head Brad Garlinghouse. In a letter addressed to federal judge Analisa Torres, the SEC writes that the blockchain company is trying to shift the blame for its misconduct to the regulator.
- Last week, Ripple filed a formal response to the updated SEC lawsuit in court. The company claims it did not distribute XRP tokens as an investment contract, and the latter term is not well defined. Ripple also noted that the regulator did not alert industry companies about XRP’s status during meetings with their representatives.
- Brad Garlinghouse, in turn, called the actions of the SEC “abuse of power.” In a letter to Torres, the executive noted that the regulator “does not recognize the economic realities of XRP transactions” and is trying to hold him accountable for “doing his job.” Garlinghouse also drew attention to the decisions of the US Department of Justice and the Financial Crimes Agency, which recognized XRP as a “virtual currency”.
SEC lawyer Jorge Tenreiro said in his response that Ripple’s defense was “legally inappropriate.” He stressed that the regulator is not obliged to warn companies in the industry about violations revealed in the course of a closed investigation.
- Tenreiro also said the Ripple case is a textbook application of the Howie test, which is designed to determine whether an asset can be considered a security. The lawyer noted that the term “investment contract” is more than 70 years old and the courts have repeatedly rejected the argument about the vagueness of its wording.
According to the SEC, recognizing an asset as “virtual currency” does not exempt a company from complying with securities laws. Treneiro asks to reject Ripple’s “legally untenable” arguments so as not to drag out the lawsuit.