Ripple’s CEO Brad Garlinghouse and co-founder Chris Larsen have recently appealed to Judge Analisa Torres, filing two separate motions to dismiss the US SEC’s amended complaint against Ripple and its executives.
In a letter dated March 3, 2021, the Attorneys representing Garlinghouse stated that the lawsuit filed by the SEC against Ripple was simply a “regulatory overreach.”
They argued that the SEC’s allegations of Garlinghouse aiding and abetting the sale of XRP, which they also alleged of being a security under the Securities Act, failed based on several reasons.
The letter reads:
“The SEC fails to recognize the economic realities of Defendants’ transactions in XRP, the XRP market, and Ripple’s business, each of which exhibits none of the traditional characteristics of an investment contract under SEC v. W.J. Howey Co.”
The Howey Test is often used by the SEC to determine whether an asset possesses the qualities of a security, and the regulatory body had argued that XRP had all the characteristics of a security.
However, Ripple and its executives have maintained that XRP is a virtual currency, as confirmed by the Justice Department and FinCEN.
The filing also remarked on the recent amended complaint filed by the SEC before the pretrial hearing on February 22, which alleged that Garlinghouse violated securities laws by selling his XRP holdings through Ripple.
Garlinghouse had reportedly sold more than 60% of his XRP holdings worth around $159 million at that time, a move that had been frowned upon by several members of the crypto community.
However, the attorneys representing him have asserted that the SEC’s complaints against him are baseless since there are no tangible proofs to show that those transactions had indeed occurred within the US.
They said that “the truth is that the vast majority of Mr. Garlinghouse’s XRP sales were made on foreign exchanges, and those transactions do not and cannot violate the federal securities laws.”
Meanwhile, Chris Larsen’s lawyers said in their letter that the regulator has failed “to state a claim against Mr. Larsen,” even in its amended complaint. Hence, the lawsuit against their client should be dismissed.
An Attack On Cryptocurrencies
The conclusion of this SEC lawsuit against Ripple will greatly affect the way cryptocurrencies are viewed and regulated.
The CEO had earlier stated that this case is an “assault on crypto at large” and that Ripple “will not let SEC bully the entire industry.”
It is still uncertain who would be declared right or wrong, we just have to wait and watch with fingers crossed.