XRP holders claim SEC does not represent their interests in latest motion to intervene

Attorney John Deaton filed a motion on behalf of XRP holders to intervene in the ongoing legal battle between the Securities & Exchange Commission (SEC) and Ripple Labs. 

SEC interest ‘completely opposite’ from XRP holders

XRP investors seek to intervene in the SEC’s lawsuit against Ripple as a third-party defendant led by attorney John Deaton. The SEC filed a $1.3 billion lawsuit against Ripple and its executives in December 2020 for offering XRP as an unregistered security. 

On behalf of XRP holders, the motion filed defines the intervening defendants as “investors, holders, developers, content providers and small businesses that utilize the digital asset XRP and the XRP Ledger.”

Litigation lawyer Jeremy Hogan claims that since XRP Holders are taking the defendant's stance, it is extremely uncommon, which could send a “message” to the judge.

According to the legal filing, over 12,600 XRP investors have contacted Deaton to join the intervention, looking to protect their interests. The intervening defendants further claimed that the SEC – an authority meant to protect the holders of XRP – does not represent their interests. The document stated:

Clearly, the SEC is either unaware of XRP Holders’ use of XRP or they are choosing to ignore such use for ligation reasons.

In a memorandum supporting the motion, XRP holders claim that the SEC’s lawsuit against Ripple – alleging that the blockchain company illegally sold XRP tokens as an investment contract – has hurt many businesses as a result. Since the SEC’s case against Ripple was announced, institutions working with the blockchain firm have ended their partnerships, citing legal risks. The memorandum stated:

The SEC has put the property of XRP Holders at the heart of this case and positions its interest at the complete opposite end of the spectrum from that of XRP Holders.

Despite the indication that the SEC does not represent its interests, the document also stated that XRP holders could not rely on Ripple. The firm has made it clear that they do not represent the interests of the intervening defendants.

XRP holders likely to have limited involvement 

The securities regulator has until May 3 to present opposing arguments against the motion. Leading the XRP community’s case, Deaton will present the intervening defendants’ case to a federal judge on May 17, who will decide the ultimate outcome. 

Following the filing of the motion to intervene, the judge now has three options to choose from. The judge could either allow XRP holders in as a party to the lawsuit, allow the intervening defendants to submit one brief at the end of the case, or deny them any involvement in the case. On this issue, the judge has nearly complete authority.

Attorney Hogan believes the judge would likely allow XRP holders only limited involvement in the case to withhold their capacity to look into discovery and depositions but allowing them to submit briefs to the court about their positions. 

SEC is in for another bad ruling

On April 16, Ripple sent a discovery objection letter-motion to Judge Sarah Netburn, requesting the SEC cease all use of memoranda of understanding (MoU) requests. The United States government has MoUs with other countries, enabling them to make requests of each other. 

According to attorney Hogan, despite having this capacity, this move was outside the scope of the Federal Rules of Civil Procedure and the court order issued by the judge regarding the discovery in the case. A huge burden and stress were put on Ripple’s business partners, said Hogan. He added:

Ripple and the other Defendants have objected to the Court in this letter, and I have reviewed the case authority in brief and, unless the SEC pulls a surprise out of somewhere, I think the SEC is in for another bad ruling against it.

Hogan further explained that the SEC could not exercise the full power and authority of the US government in civil litigation against a private entity. The litigation attorney further believes the SEC will “get hammered for it.”

Following twin victories in the week prior, Ripple Labs filed a motion to dismiss the SEC’s lawsuit.