The head of Ripple Brad Garlinghouse and co-founder of the company Chris Larsen prepared appeals to the court in response to the amended lawsuit by the US Securities and Exchange Commission (SEC). In it, the regulator highlighted the individual responsibility of top managers.
Today, a letter was filed on my behalf indicating my intent to file a Motion to Dismiss in response to the SEC’s amended complaint against me. Simply put, the SEC’s allegations are regulatory overreach. The letter speaks for itself: https://t.co/bwj9YdDOQw
– Brad Garlinghouse (@bgarlinghouse) March 3, 2021
Garlinghouse called the SEC allegations “regulatory arbitrariness.” He intends to petition to dismiss the claim.
Attorneys at Cleary Gottlieb Steen and Hamilton said the commission’s claims were untenable for a number of reasons. Among them – the refusal of the SEC to recognize “the economic realities of the defendant’s transactions in XRP, the XRP market and the Ripple business.”
“All of them are devoid of the traditional characteristics of an investment contract,” the letter says.
According to lawyers, imposing individual responsibility on a manager for “doing his job within the law” is an abuse on the part of the prosecution.
“This is a dangerous signal to entrepreneurs and discourages innovation,” said Steen and Hamilton at Cleary Gottlieb.
Ripple co-founder Chris Larsen also went to court to dismiss the claim due to its insolvency. According to the document, the SEC was unable to prove that the top manager provided “significant assistance” to the company in the sale of the token and knew about XRP compliance with the definition of a security.
“The SEC said XRP sales were one offer over a long period […] the limitation period began in 2013 and expired in 2018, ”the letter says.
Independent attorney Jeremy Hogan noted that the commission had indeed failed to prove intentional misconduct by Garlinghouse.
Hogan admitted that the court would reject the petition. However, this does not exclude the possibility of a positive outcome for the management and the company in the future, the expert concluded.
Recall that in December 2020, the SEC accused Ripple of selling unregistered securities in the form of tokens worth $ 1.3 billion. Garlinghouse and Larsen were also defendants.
The CEO of the firm called the lawsuit “a terrible precedent” for the entire cryptocurrency industry. Ripple has always worked in partnership with regulators, he said.
In January 2021, the defendants’ lawyers asked the SEC for information why it does not include Bitcoin and Ethereum securities.
In late January 2021, a Florida resident sued Ripple Labs and Garlinghouse for violating state securities law and illegal enrichment.
Tetragon Financial Group also filed claims against the company, which in 2019 led the Ripple Series C funding round for $ 200 million.
A number of large companies have dropped support for the XRP token amid SEC claims. These include Coinbase and OKCoin, Bitstamp and Grayscale Investments.
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