All-out clash between Ripple and SEC

A legal clash has been going on between Ripple and the SEC for some time now, and it is mainly intended to answer the question of whether or not XRP tokens should be considered the same as stocks. 

The positions are known and a verdict could even be reached by the end of this year. 

The lineup of the legal route sees Monday, 5 December as the deadline to lay down a settlement agreement between the parties. 

In the absence of a settlement, Judge Torres as expected by many will reach a short-notice verdict by March 2023. 

The case is very important to the entire cryptocurrency world and has even been called monumental by Dan Gambardello, the founder of Crypto Capital Venture. 

While waiting for a verdict, Ripple also pressed the SEC on the BlockFi case. 

BlockFi, according to a widespread opinion that Ripple’s legal counsel and Chief Technology Officer (CTO) was able to convey clearly, would have been harmed by the US regulator. 

Earlier this month the exchange had blocked withdrawals from accounts and advised against new deposits for purchases. 

BlockFi had borrowed $400 million from FTX in the summer, and when the case over FTT hedges came up, the platform suspended operations fearing contagion, which, however, was inevitable. 

The Ripple-SEC lawsuit and the connection to BlockFi and FTX

For Stuart Alderoty, general counsel of Ripple Labs, BlockFi’s failure comes from the series of consequences that triggered the February settlement agreement between the regulator and the platform for incorrect product registration. 

On that occasion, the fine imposed was $100 million, a fine on which Alderoty’s suspicions fall. 

“What about the first two payments on the $100M fine? If they were made, did the SEC confirm BlockFi’s ability to pay and/or the source of funds? FTX b/cy shows a $250M loan to BlockFi and now customer funds are blocked.”

Australian lawyer Bill Morgan in response to the above stated the following:

“The crypto assets of FTX/BlockFi investors, which the SEC is supposed to protect, were used and the SEC received stolen funds. Is receiving stolen funds a felony/crime?”

Ripple CTO David Schwartz commented:

“In other words, the SEC may have weakened BlockFi financially to the point where the company had no choice but to hold cryptocurrencies on FTX to keep it running, which may have been the reason for the crash.”

Ripple’s general counsel does not stop there in his criticism and commented on how the SEC’s annual report is truly unbelievable. 

The Securities and Exchange Commission in 2022 executed 760 enforcement actions worth $6.4 billion (up 9% over 2021).

Finally, Gary Gensler explains how the SEC has been working hard to combat malfeasance over the past period:

“I continue to be impressed with our application division. These numbers, however, only tell part of the story. Application results change from year to year. What remains the same is the staff’s commitment to follow the facts wherever they lead.”