John Deaton, the founder of CryptoLaw, voiced his firm support for Ripple’s top executives, Brad Garlinghouse and Chris Larsen, amid their ongoing legal battle with the U.S. Securities and Exchange Commission (SEC).
Deaton’s commentary follows a recent interview with Ripple’s General Counsel, Stuart Alderoty.
Ripple’s Ongoing Legal Confrontation
In December 2020, the SEC sued both ripple ripple m***[email protected] Crypto / Blockchain SolutionPayment solution and its executives, Garlinghouse and Larsen. The accusation? The duo was allegedly reckless in the distribution of Ripple’s native cryptocurrency, XRP.
Deaton, however, refutes these claims, asserting that no reasonable jury would see their actions as reckless.
SEC’s “Outrageous” Accusations
Alderoty, Ripple’s Chief Legal Officer, labeled the SEC’s accusations as ‘outrageous’. According to him, to establish the recklessness of the execs, the SEC must prove that they either knew the law and disregarded it or were ignorant of it. Alderoty insists that at best, the SEC was internally debating what the law was, or worse, they intentionally distorted it to create confusion.
Deaton Slams The SEC
John Deaton did not mince words in his response. He called out the SEC for resorting to ‘bully’ tactics, accusing the regulator of an overzealous investigation into the private financial records of Garlinghouse and Larsen, despite Ripple providing complete transaction details.
The lawyer also criticized the SEC for employing fraud-like language in a non-fraudulent case, an approach he viewed as an attempt to intimidate and pressure the executives.
Deaton applauded the Ripple leaders’ unwavering stance, stating, “When you’re innocent, the two executives did exactly what you do with a bully – Punch in the face.”
Deaton has previously offered his two cents on the SEC’s case, noting that the regulatory body itself was grappling with the question of whether XRP is a security as recently as 2018.
Two separate analyses conducted by SEC enforcement lawyers and a third party came to the same conclusion: XRP sales do not meet all the requirements of the Howey test, a standard used to determine if a transaction qualifies as an “investment contract.”
Drawing on these reports, Deaton questioned, “If the SEC itself was struggling in 2018 to determine whether XRP was being offered/sold as a security, could these two executives still be reckless in 2013?”
He also declared that the outcome of the Howey analysis would greatly impact Judge Analisa Torres’ ruling on whether Garlinghouse and Larsen were indeed reckless in their handling of XRP.