The Crypto Uprising The SEC Didn’t See Coming

by Roslyn Layton. August 31, 2021. (Forbes).

When the U.S. Securities and Exchange Commission (SEC) filed its bombshell lawsuit against cryptocurrency innovator Ripple Labs in December 2020, it didn’t expect blowback. But during the pre-trial phase, Ripple’s legal team has put the SEC itself on trial after years of conflicting and confusing guidance on the rules for cryptocurrencies. No one expected the tsunami of legal, political and social media action from retail cryptocurrency investors, outraged by the betrayal from an agency claiming to protect their interests. The meltdown of the SEC’s credibility with this $2 trillion global investor community exposes a costly SEC miscalculation.

Indeed, official Washington has been back-footed by the size, scale and diversity of the crypto investor class and the industry they support. Lampooned by mainstream media and the U.S. government for years, the crypto community has built a media ecosystem that connects millions of investors, consumers, developers and entrepreneurs across the globe. It’s fitting that the pioneers of the blockchain economy would apply consensus protocols to their communication. This decentralized social media apparatus has proven powerful — just ask Congress after the backlash of the infrastructure bill over a badly written crypto tax provision. When the Ripple lawsuit was filed, that ecosystem galvanized an independent battlefront unexpected by the SEC.

Read the Full Article Here.

We Need A Ripple Test To Stop The SEC’s Overreach On Cryptocurrency

By Roslyn Layton. May 18, 2021. (Forbes).

The regulatory future of cryptocurrency seems destined to be decided by the courts, thanks to an ill-conceived lawsuit filed by the Securities and Exchange Commission. If Ripple’s arguments prevail in the Southern District of New York and on appeal, this case could give the Supreme Court a chance to review the 1946 Howey decision which set a standard for what constitutes a security. 

Courtroom Showdown

I’ve covered the SEC’s case against Ripple Labs case since it was filed by the SEC in December 2020 because it had all the hallmarks of classic enforcement overreach. Ripple and cryptocurrency investors have fought back with robust arguments while the SEC has stumbled and exposed its former leaders’ troubling conflicts of interest. It looks like something bigger than a mere lawsuit. The historical moment adds urgency to resolving whether XRP is a currency or security, a question which financial innovation makes difficult, but also demonstrates the SEC’s abuse of its authority.

The total market cap of all cryptocurrencies, including the XRP digital token at the heart of the Ripple case, tops $2 trillion dollars. The sum of these digital assets is now worth more than the total number of U.S. dollars in circulation. Global companies like Goldman Sachs and PayPal are racing to adopt the technology for consumer products. But more ominously, China has already rolled out a central bank digital currency (CBDC) called the Digital Yuan for domestic commercial and consumer use on a big scale. Mastercard has opened talks to act as a financial bridge for China to expand the Digital Yuan’s global network, export its applications and compete against both cryptocurrencies as the U.S. dollar in the emerging digital economy.

Read the Full Article Here.

With Crypto, Congress, Not Agencies, Should Decide What’s Next

By Andrew Langer. April 27, 2021. (The American Spectator).

Alongside the public’s newly found fascination with cryptocurrencies (which only sometimes includes their attempts to try and understand what they are — a process for the teacher akin to trying to explain to an AARP member how to program a VCR back in the day), there is serious debate and discussion among scholars and policymakers about how to look at them and treat them for public policy purposes.

From a public policy perspective, the question centers essentially on assigning “crypto” to one of four different categories. Are they

  • Securities? Are they a tradeable “financial instrument” that create some kind of ownership right?
  • Commodities? Are they some kind of raw material gained through a resource-intensive extraction process?
  • Currencies? Are they some kind of unit of exchange backed by some kind of hard asset?
  • Something different entirely, requiring a whole new vocabulary or public policy approach?

All are being considered, and each approach has its adherents and detractors.

The most logical route would be to view cryptocurrency as an entirely new thing (which it is). It doesn’t easily fit into any of the preexisting categories — it’s somewhere, honestly, between a commodity and a currency. Many cryptocurrencies do require intense resource utilization, but they can immediately be used as a standard of exchange.

Read the Full Article Here.

The SEC Raised its Fist and Showed Its Contempt for Us. Today, We Answered.

By John E. Deaton, Founder and Host of CryptoLaw.

Five months ago, almost to the day, the U.S. Securities and Exchange Commission filed a lawsuit against Ripple but made it clear it was coming after everyone connected to XRP.  They ignored warnings that this lawsuit would cause serious harm to countless people.  There was never one phrase in the mountain of pages the SEC has filed since December 22, 2020 that showed one bit of consideration for the retail investors they are supposed to be defending by their every enforcement action. When we asked the court to hear our voice, the SEC scoffed and insulted us in their formal response, saying that all of us who suffered collateral damage from their ill-conceived lawsuit should remain silent.

Today, we answered them.

I have just filed our Motion to Intervene in the case of SEC v. Ripple, on behalf of an entire community of XRP holders, users, developers, content providers and the many small businesses that utilize the digital asset XRP as well as the XRP Ledger.   In short, I made it clear to the court that without our intervention, we are without a voice in a debate of great stakes for us and the holders of all digital assets in the United States.

When the SEC brought this lawsuit against Ripple and its two executives, it not only claimed that Ripple and its executives conducted an unprecedented eight-year continuous and ongoing coin offering, it also specifically alleged XRP itself to be an unregistered security and all of us who have traded it since 2013 have been engaged in unlawful trades.

This troubling claim is not disguised or otherwise difficult to find. In the first paragraph of their complaint, the SEC labels XRP itself as a “digital asset security.” The SEC claims that “from 2013 through the present, Defendants sold over 14.6 billion units of a digital asset security called XRP.” The SEC is alleging that any sale or transfer of XRP by any entity, business or individual is a violation of Section 5 of the Securities Act.  They also go further in saying that XRP has “no utility” other than as an investment contract in Ripple, despite the fact that a massive community of XRP users and developers has existed for years completely apart from that company.  Indeed, a huge segment of XRP holders had never heard of Ripple when the SEC accused them of having entered into a “common enterprise” with Ripple.  The absurdity and arrogance of this unrestrained, out-of-control regulator’s claims could not be further from the truth.  Their logic could only be sustained if the SEC was able to suppress any XRP retail holder from speaking up and telling our stories of how we use this digital currency in a variety of ways.

It should give all cryptocurrency holders and developers faith that the U.S. District Court for the Southern District of New York does not appear to be buying what the SEC is trying to sell in this case.  It has taken on the SEC’s lawyer over XRP’s utility as well as his preposterous argument that all sales of XRP are unregistered securities trades.  Best of all, the court has invited us to argue why we retail holders – those the SEC is supposed to be protecting – should intervene in the case.

For more than eight years, the SEC allowed XRP, the XRP ledger, and their associated technologies evolve from a promising digital asset with superior functionality into the third-largest digital currency in the world. The XRP of 2021 is very different than that of 2013. For these reasons, it is clear that those of us who hold and use XRP have a right to intervene in this case in order to adequately our interests. The very interests the SEC decided to dismiss when they filed their December complaint.

If the SEC is successful in its attack on Ripple and XRP, it will assume the authority to regulate and attack every other cryptocurrency in existence. The precedent set here become the new standard and no digital asset exchanges, developers, vendors, ordinary users, and retail holders of cryptocurrencies will be safe.  

It is now up to the court to decide whether we can join the case.  Nothing is guaranteed, and we must respect the judge’s ultimate decision.  But I’m proud and honored to have the trust and support of such a dynamic and innovative community of XRP holders who refused to back down when the government raised its fist and told us to be silent.

“Word on the Block”: Lawyer for 11,000 XRP holders pushing to fight SEC in Ripple lawsuit

April 8, 2021. Forkast News.

On Christmas Eve of 2020, attorney John Deaton felt rocked by the United States Securities and Exchange Commission’s lawsuit against Ripple and its two executives — CEO Brad Garlinghouse executive chairman Chris Larsen. As he read that the SEC was charging Ripple for selling unregistered securities worth over US$1.3billion from 2013, his surprise turned to disbelief. As Ripple and SEC intensify their legal warfare, attorney John Deaton and his clients want in. Will XRP investors get their day in court?

Watch the episode of “Word On the Block” here.

US Court Rejects SEC’s Attempt to Block XRP Holders’ Motion to Intervene in Ripple Lawsuit

By Kevin Helms. March 30, 2021. (Bitcoin.com).

In the U.S. Securities and Exchange Commission (SEC) v. Ripple Labs case, the district court of the Southern District of New York “has reviewed the parties’ and proposed intervenors’ letters dated March 19 and 26, 2021,” according to the court document filed Monday.

The SEC filed a lawsuit against Ripple Labs Inc., CEO Brad Garlinghouse, and co-founder Christian Larsen in December, charging them with conducting a $1.3 billion unregistered XRP securities offering. On March 19, Deaton Law Firm wrote a letter to District Judge Analisa Torres on behalf of XRP holders, as proposed intervenors. It was signed by over 10,000 XRP holders at the time of filing. The SEC responded on March 26, attempting to convince Judge Torres to deny the Motion to Intervene.

SEC v. Ripple: Attorney Deaton files pre-motion letter for intervention by 10,000 XRP holders

By Jake Simmons – March 19, 2021. (Crypto News Flash).

As CNF reported, Judge Analisa Torres of the Southern District of New York on March 15 denied John E. Deaton’s motion to intervene in the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Ripple on behalf of thousands of XRP holders. Torres reasoned that under the court’s local rules, a pre-motion letter must be filed requesting approval of the motion.

Deaton had wanted to refer to an exemption, which Torres did not recognize. A few days after that, Deaton is now launching a new effort. As Deaton writes on a blog post on CryptoLaw, he filed the pre-motion letter yesterday, March 19, to request intervention by XRP holders, while there are now over 10,000 XRP investors supporting the motion.

Read the Full Story Here.

A Letter to Judge Torres – signed by 10,000, and counting…

By John E. Deaton, Founder and Host of CryptoLaw.

Today I filed a pre-motion letter to Judge Analisa Torres to share the reasons why we are asking to intervene in the SEC v. Ripple case. Among other topics, the letter addresses why we should be allowed to intervene in the case and establish our interests in its ultimate result. 

Allowing us to intervene is appropriate because neither party in the case currently represents the holders and users of XRP.  A key aspect of Ripple’s defense will be to demonstrate that they have no duty or obligation to XRP holders, and given the SEC’s actions thus far, we can’t expect it to even consider the interests of XRP holders.

However, whether we like it or not, we have been impacted by this SEC lawsuit and will certainly be impacted by the ultimate result.

If allowed to intervene, among critical interests, we will demonstrate that XRP is a government-recognized currency that is completely independent of Ripple. We will show how XRP is being used in the U.S. and around the world as a currency.

For example, six years ago, the Financial Crimes Enforcement Network (“FinCEN”) entered into an agreement with Ripple that XRP would be considered a virtual currency and its use would be registered exclusively with FinCEN, not the SEC. Afterwards, foreign nations started agreeing with the U.S. government’s 2015 currency classification of XRP, and Japan, Switzerland, the U.K. and the UAE have all declared XRP is not a security. Since that 2015 designation as virtual currency, the use cases of XRP have exploded.

The number of XRP holders joining this effort is now over 10,000 and growing.  We are determined to tell our story.

See the full pre-motion letter, posted to the CryptoLaw Document Library here.

If you are an XRP holder who wants to join in legal actions related to this case, fill out this form with the Deaton Law Firm here.

Over 6,000 XRP holders volunteer as third party defendants in SEC lawsuit

By Greg Thomson – March 15, 2021. (Cointelegraph).

XRP coin holders have attempted to insert themselves as third-party defendants in the United States Securities and Exchange Commission’s lawsuit against Ripple Labs.

motion to intervene was filed by John Deaton of Deaton Law Firm on March 14 on behalf of over 6,000 XRP holders. Deaton — himself an XRP holder — argued that the interests of coin holders were not being adequately represented in the securities lawsuit against Ripple Labs and its executives.

Deaton’s argument builds upon the refutation of any securities violations by Ripple Labs. Specifically, if XRP is not a security, as Ripple executives Bradley Garlinghouse and Christian Larsen claim, then the efforts of said executives have no bearing on the performance of XRP.

Read the Full Story Here.

The SEC said everything will be decided in New York. So, here we come.

By John E. Deaton, Founder and Host, CryptoLaw.

On December 22, 2020, former SEC Chairman Jay Clayton directed the filing of the most significant SEC enforcement action in modern history on his last day. The SEC complaint named defendants Ripple Labs, along with, co-founder Chris Larsen and CEO Bradley Garlinghouse.

The SEC action against Ripple and its executives caused over $15 billion in losses for XRP holders in the days following it.

Clayton’s action against Ripple, and its impact on retail investors, was the culmination of more than a decade of the SEC refusing to set clear rules of the road for the treatment of digital assets or the development of projects that used them.  They have chosen to set policy by enforcement, dismissing the interests of the people they have a mission to protect.

So, on January 1, 2021, I filed a Petition for Writ of Mandamus in Rhode Island Federal District Court, asking the SEC to amend its complaint to limit the impact on XRP holders.

On March 5, the SEC responded with a motion to dismiss my petition. In it, the agency again shirked any responsibility for the catastrophic harm caused by its actions against Ripple and its executives. Instead, the SEC blamed cryptocurrency exchanges for causing the financial harm suffered by XRP holders, despite Jay Clayton himself having been warned of the massive impact by former SEC commissioner Joseph Grundfest.

In its motion to dismiss my petition, the SEC  said that the US District Court for the Southern District of New York is the only forum to weigh all matters related to their actions against Ripple, and XRP holders by default:

“Here, an avenue for judicial review of the Commission’s complaint against Ripple clearly exists. The Southern District of New York will decide whether the complaint warrants any relief. Thus, the Commission’s enforcement proceeding in the Southern District of New York, brought under the Securities Act, supplies the exclusive method for testing the validity of the Commission’s complaint against Ripple.”

If the Southern District of New York is the exclusive venue for decisions that have already proven to have a massive impact on XRP holders and are likely to set the course for the future of all cryptocurrencies in the U.S., then that’s where we must go.

Ripple, Larsen and Garlinghouse are focused on defending their interests against the SEC’s attack, and the $1.3 billion the agency requested from them in damages. It’s not up to them to defend mine, or the interests of any other XRP holders.  We didn’t buy XRP from them, nor did we consider Ripple’s success as a company when we bought it.   It’s up to us to defend ourselves against the SEC.

Today I am filing a motion to intervene in that case in the exclusive venue to represent our interests.  I’m calling the agency on its arguments, and I will see this through to the end. That motion and others related have been uploaded to the CryptoLaw document Library:

If you are an XRP holder and want more information on joining this action, fill out an online form that my law office has made available here.