A group of XRP holders seek to intervene in the action brought by the Securities and Exchange Commission (SEC) against Ripple Labs at the New York Southern District Court.
The proposed intervenors are Jordan Deaton, James Lamonte, Tyler Lamonte, Mya Lamonte, Mitchell Mckenna, and Kristiana Warner. On March 14, 2021, they moved the Court for an Order granting leave to intervene in the SEC’s case as of right under Federal Rules of Civil Procedure 24(a), or in the alternative, as a matter of permissive intervention under Federal Rule of Civil Procedure 24(b).
XRP Holders seek intervention for the purpose of protecting their substantial interests that will be greatly impacted by the disposition of this action.
The grounds for permissive intervention by XRP Holders are:
- The Motion to Intervene is timely.
- XRP Holders have a claim or defense that shares with the main action a common question of law or fact.
- The intervention of XRP Holders will not unduly delay or prejudice the adjudication of the original parties’ rights.
- If granted leave to intervene, XRP Holders will significantly contribute to the full development of the underlying factual issues in the case and to the just and equitable adjudication of the legal question presented.
Last week, the SEC slammed Ripple for seeking to avoid liability for its unregistered offering by diverting the Court’s attention with a number of affirmative defense arguments pigeonholed into the label “fair notice.” Ripple’s arguments ask the Court to conclude both that the term “investment contract” is not sufficiently defined, such that Ripple lacked notice that its conduct could be prohibited, and that the SEC should have stopped Ripple sooner.
The regulator says that these allegations – also the basis of Ripple’s attempts to seek a multitude of privileged SEC deliberations – will lead to “wasteful forays” in this litigation, and should be stricken.
The SEC notes that Ripple essentially capitalized its entire business by selling a digital asset security to the public while promoting to investors the potential for profits based on Ripple’s future efforts. Yet Ripple now claims surprise that the SEC filed this enforcement action.
The SEC says that:
“Rather than acknowledge its own obligation to follow the law, Ripple instead posits that the SEC staff has an obligation to affirmatively warn industry participants about violations of other participants—even if the staff is in the process of conducting a non- public investigation—a requirement that does not exist in our legal system”.
Finally, the regulator notes Ripple’s complaints that the SEC is stifling innovation. But innovation cannot come at the expense of investor protections provided by long-standing law, the SEC concludes.