SEC accuses Ripple of distracting the court with untenable defence arguments

In a letter addressed to Judge Analisa Torres, the U.S. Securities and Exchange Commission (SEC) said Ripple is seeking to dodge liability for an unregistered securities offering by distracting the court with defence arguments about the vagueness of securities-law standards.

According to the fintech company, the term “investment contract” is not sufficiently defined, so it could not understand that its actions violated the rules, and the SEC should have halted the firm earlier, said regulator’s lawyer Jorge Tenreiro.

But he said the term was first defined by the Supreme Court in 1946 and has operated for more than 70 years, and authorities are not obliged to warn industry players of possible violations of current law.

“Ripple argues that the SEC failed to provide the firm with due process and a ruling, because the Commission staff allegedly met with industry executives and did not tell them that XRP is a security,” added Tenreiro.

As arguments in defence, Ripple also invoked a global settlement with the Treasury Department, which recognised XRP as a virtual currency. However, the SEC lawyer stressed that this does not exempt the company from securities-law compliance.

Tenreiro argued that the court should reject Ripple’s ‘legally unsustainable’ arguments to avoid delaying the case.

The attorney will also move to dismiss Brad Garlinghouse’s and Chris Larsen’s statements, made in response to the amended SEC complaint.

Back in December, the regulator accused the company of selling unregistered securities in the form of XRP tokens worth $1.3 billion. The parties doubted the possibility of a pre-litigation settlement of the claim.

After the SEC’s accusation, trading of the Ripple token was halted by a number of American exchanges, and the company was compelled to cease cooperation with MoneyGram’s US money-transfer service.

Against this backdrop, Ripple’s CEO said that the firm’s business in the Asia-Pacific region has not suffered.

gov.uscourts.nysd.551082.54.0 by ForkLog on Scribd

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