SEC wants to prevent intervention by XRP holders in Ripple lawsuit
Less than a fortnight after a number of XRP holders sought to intervene in the action brought by the Securities and Exchange Commission (SEC) against Ripple Labs, the regulator has made it clear that it opposes such an intervention.
On March 26, 2021, the SEC submitted a Letter at the New York Southern District Court, arguing against the intervention.
The document, seen by FX News Group, argues that the movants (that is, the XRP holders) do not explain what claims they would assert against whom in this action if the Court were to permit the motion to intervene. But Congress has barred by statute the consolidation or coordination of claims without the SEC’s consent, and sovereign immunity bars Movants’ claims against the SEC. That alone precludes Movants’ proposed intervention.
The SEC argues that intervention should be denied for other reasons too. According to the regulator, the ultimate goal of the XRP holders in seeking to intervene is for XRP to become available again for trading on digital asset platforms so that they may buy and sell XRP as a speculative investment. This is an improper basis to seek to intervene in this case.
Intervention would serve no purpose here, the SEC says. The defendants, with several law firms representing them, are already making the arguments Movants want to advance as to whether XRP was offered and sold as a security.
Moreover, if the Court permitted Movants to intervene, all other XRP holders, including a large class of XRP investors who has already sued defendant Ripple Labs, Inc.for unregistered offers and sales of XRP securities, would likely seek to intervene, too. Intervention would thus create an “avalanche” of claims and “near-certainty of undue delay, complexity and confusion,” the SEC says.
Let’s recall that, on December 22, 2020, the SEC filed this action, alleging that defendants Ripple Labs and Ripple’s two CEOs engaged in unregistered offers and sales ofXRP from 2013 through December 2020 in violation of Section 5 of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77e. At the heart of the SEC’s case is its contention that the defendants offered and sold XRP as “investment contracts” and therefore securities.