John Deaton, a prominent pro-Ripple lawyer representing over 75,000 individuals affected by the SEC v. Ripple case, has spoken out against the U.S. Securities and Exchange Commission’s (SEC) actions in the lawsuit against Ripple Labs and co-defendants.
Deaton’s remarks followed the publication of an article titled “The SEC Is Not the King” by the American policy website RealClearPolicy (RCPC) on Thursday, which shed light on the high-profile case.
SEC’s Controversial Lawsuit Against Ripple
The SEC lawsuit, filed in late 2020, alleged that XRP, Ripple’s native cryptocurrency, should be classified as a “security” under the Securities and Exchange Act of 1934. This move sent shockwaves through the cryptocurrency industry, causing the value of XRP to plummet by over $15 billion within a short period.
However, the lawsuit took a turn on July 13, 2023, when Judge Analisa Torres dismissed the SEC’s claim that XRP sales qualified as securities transactions. This pivotal ruling highlighted that only a limited portion of Ripple’s XRP sales, those with institutional investors and formal agreements, met the legal criteria for securities. As a result, the broader SEC case, which had incurred an estimated $100 million in defense costs, started unravelling, causing significant harm to innocent investors.
Moreover, evidence surfaced that raised questions about the SEC’s transparency and honesty. Despite public statements indicating that cryptocurrencies like XRP were not securities, internal SEC documents revealed a contrasting, hidden position held by the agency’s general counsel. This revelation only came to light due to the lawsuit against Ripple.
Deaton’s Concurring Voice
In response to the RCPC article, John Deaton expressed concern about the SEC’s actions, tweeting, “The SEC harmed a lot of innocent people in the process. 75K investors, users, developers and small businesses have been screaming the above for 3 years.”
Deaton’s comments followed his blog post “The Irony of Interlocutory Appeal” on Thursday, criticising the SEC’s appeal strategy. In the blog, the pundit noted that SEC’s move to seek interlocutory appeal after its initial loss appeared to be an attempt to salvage its reputation. Deaton predicted that Judge Torres would grant this motion, allowing her to clarify her reasoning and potentially making her ruling “appeal-proof.”
However, he raised important questions about the SEC’s purported desire for an efficient resolution. Deaton pointed out the incongruity of the SEC’s request for a stay, which would inevitably prolong the litigation while simultaneously claiming to seek a swift resolution. He argued that even if the SEC secured an early appeal victory, it would only lead to further delays and appeals, undermining their professed goal of expeditious resolution.