Ripple CLO Highlights 3 Major Elements in SEC v. Terra Ruling

Ripple CLO comments on the SEC v. Terra ruling, highlighting three major elements in the court’s verdict.  

Stuart Alderoty, Ripple’s Chief Legal Officer (CLO), has taken to X (formerly Twitter) to comment on the summary judgment decision issued in the SEC v. TerraForm Labs lawsuit. 

I have no firm view on the merits of the Terraform case, but here are a couple of thoughts on yesterday’s ruling. 1. Facts matter. 2. Judge Rakoff does not criticize, let alone even cite, Judge Torres’ Ripple ruling; 3. The SEC’s “forever” crypto ground war, fighting token by…

— Stuart Alderoty (@s_alderoty) December 29, 2023

SEC v. Terra Ruling 

Recall that U.S. District Judge Jed Rakoff issued the highly anticipated summary judgment on December 28, with the SEC securing a major victory. As reported earlier, the judge declared UST and LUNA as securities while rejecting the SEC’s claim that Terra illegally offered security-based swaps. 

Notably, the SEC’s fraudulent claims against Terra and its founder, Do Kwon, will be decided in a jury trial scheduled for January 2024. 

Ripple CLO Reacts 

The summary judgment decision in the Terra case has stirred reactions from top crypto stakeholders and legal experts. Interestingly, Ripple CLO is the latest legal expert to comment on the matter. 

The Ripple CLO highlighted three important elements of the ruling in a tweet yesterday. Alderoty stated the importance of factual basis in cryptocurrency-related legal cases. 

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In Alderoty’s analysis, he pointed out that Judge Rakoff did not criticize nor cite the ruling issued by his colleague Judge Analisa Torres in the Ripple case. 

The omission of the Ripple verdict in Terra’s summary judgment is noteworthy, given the similarities of both cases. For context, the SEC alleged that both Ripple and Terra offered unregistered securities. While the Ripple judge held that XRP in itself is not a security, Judge Rakoff ruled that UST and LUNA constitute securities. 

Earlier this year, Judge Rakoff disagreed with Judge Torres’ reasoning in the Ripple case. According to Judge Rakoff, the Howey test, a longstanding security test in the U.S., does not distinguish between buyers the way Judge Torres did. 

A Fool’s Errand 

Furthermore, Alderoty took a swipe at the SEC’s approach to regulating crypto through litigation. He characterized the SEC’s war on crypto as a fool’s errand driven by a quest for political power rather than a foundation in sound policy. 

Alderoty’s remark comes as the industry continues to grapple with regulatory uncertainties and protracted legal battles. Aside from Terra and Ripple, the SEC is also embroiled in legal tussles against top crypto exchanges like Coinbase, Binance, and Kraken.   

In these lawsuits, the regulator labeled over 10 crypto assets as securities. With the SEC’s latest victory against Terra, there is a tendency for the regulator to give the securities tag to more tokens.