SEC Opposes Intervention by Cryptocurrency Holders in SDNY Suit

Earlier this week, the Securities and Exchange Commission filed a legal memorandum opposing the intervention of six XRP cryptocurrency holders in its lawsuit against blockchain company Ripple Labs Inc. and two of its executives, co-founder and chairman Christian Larsen and CEO Bradley Garlinghouse. The lawsuit, filed in December of 2020 in the Southern District of New York, alleges that Ripple raised over $1.3 billion through the sale and distribution of unregistered digital assets of XRP in violation of Sections 5(a) and 5(c) of the Securities Act of 1993.

In their motion to intervene, the movants said that when the SEC brought the lawsuit against Ripple, it alleged that XRP is a security, not a currency, and that all XRP, including that which is owned and utilized by XRP holders, constitute unregistered securities. 

“The SEC has put the property of XRP Holders at the heart of this case and positions its interest at the complete opposite end of the spectrum from that of XRP Holders. The Defendants have also made it clear that they do not represent the interests of XRP Holders. Simply put, XRP Holders cannot rely on the Defendants’ efforts in this case. Without intervention, the SEC can continue to manipulate the role of XRP Holders to fit its narrative against Ripple and its two executives and potentially destroy the property interests of XRP Holders,” they said.

The SEC seeks to deny the motion to intervene on the grounds that the movants cannot offer any unique perspective or information that is not already available to the Court, are not impartial participants, but advocates for Ripple, and that their arguments are not relevant to the charges brought by the SEC. 

In response, the movants said XRP holders “have a protectable interest that could be impeded, if not destroyed, by the disposition and outcome of this case. Moreover, the existing parties do not adequately represent their interest. XRP Holders should be allowed to speak for themselves. XRP Holders do not seek to broaden the scope of the SEC’s claims but rather protect their interests and provide the court with critical information necessary for the fair disposition of this case.”

The court has yet to decide on the motion to intervene. The proposed intervenors are represented by Deaton Law Firm.