The Securities and Exchange Commission (SEC) is attempting to block XRP holders from aiding in Ripple’s defense, and prohibit attorney John E. Deaton from any further participation in proceedings.
In its official objection submitted on July 19, the regulator opposed the decision to recognize 1,746 XRP holders as “amici curiae” along with attorney John E. Deaton.
Amici (plural: amici curiae) means “friend of the court” — an individual or organization not a party to a legal case but is permitted to assist a court by providing information, expertise, or insights. In this case, in support of Ripple’s defense.
Deaton has 3,252 affidavits signed by the token holders essentially stating that they are victims of the SEC’s attack on Ripple as a result of lost profits.
Holders claim in the affidavits that they either did not assume legal responsibility for purchasing XRP, they bought the tokens for utilitarian purposes instead of investment purposes, or they did not buy based on promises made by the company and its representatives.
However, in its objection to XRP holders, the commission claimed that they are attempting to operate outside of strictly legal issues. The SEC wrote:
“Movants do not propose briefing on legal issues. Instead, they wish to present arguments based on 3,252 affidavits “attesting” to certain facts.”
The commission has cited alleged threats by Deaton against former SEC Chairman Jay Clayton as reasoning to dismiss him as amicus. The SEC included a redacted letter dated June 7 to Judge Torres that cites a YouTube video from 2021 in which Deaton stated he “might have to walk over and slap the [profanity] out of former SEC Chair Jay Clayton.”
The XRP holders and Deaton as amici are required to submit a public reply to the SEC’s objection by July 25.
Ripple is a blockchain company that issues the XRP token. The SEC has alleged in an ongoing court case which started in 2020 that Ripple and its executives Brad Garlinghouse and Christian Larsen sold XRP as unregistered securities.
Deaton has claimed that the SEC has been inconsistent with its application of the law against Ripple, Garlinghouse, and Larsen. In a July 19 thread on Twitter, the lawyer explained that if the SEC truly thought XRP was a security, it would have filed an injunction against Ripple and issued a cease and desist order against the two executives and Jed McCaleb from selling their tokens.
The SEC claims #XRP itself is a security and anyone who sells it is violating Section 5 of the Securities Act. The SEC claims @Ripple @bgarlinghouse & @chrislarsensf “enriched” themselves at the expense of investors and it is seeking $1.3B in disgorgement from these defendants. https://t.co/9nJ1iNroth
— John E Deaton (207K Followers Beware Imposters) (@JohnEDeaton1) July 18, 2022
Adding to this argument was General Counsel for Ripple Stuart Alderoty who pointed out on July 19 that no country, including the US so far, has officially categorized XRP as a security.
The outcome of this case could determine whether XRP is a security. If the judge rules in favor of the SEC, it could be the precedent the commission needs to pursue legal action against other crypto projects that sold tokens similarly to Ripple.