Joseph Grundfest reportedly warned Jay Clayton and the SEC about filing the lawsuit against Ripple Labs for “potentially billions in losses” to investors.
The former SEC Commissioner questions “the true motive of Clayton and the SEC.”
John E. Deaton, an attorney who focuses on the cryptocurrency sector among others, yesterday posted a thread on Twitter that shed further bad light on the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Ripple Labs. The lawsuit was filed just days before Christmas and the departure of SEC Chairman Jay Clayton, which is why there were voices that suspected unknown motives on the part of high-ranking officials behind the lawsuit.
Deaton is now taking the same tack, claiming that the SEC was warned by Joseph Grundfest, a former SEC commissioner under U.S. President Ronald Reagan, that investors could lose billions considering “the magnitude of an SEC enforcement action” against Ripple’s XRP. Grundfest reportedly sent Clayton a letter before filing the lawsuit, wherein he warned in detail of the consequences and also questioned the motives.
Ex-SEC official doubts motives behind lawsuit against Ripple
According to Deaton, Grundfest warned that the mere filing of the lawsuit, declaring XRP an unregistered security, “would result in an UNPRECEDENTED scenario of billions of dollars in losses resulting from an exodus of intermediary market service providers.” This, Deaton said, was a direct quote from the former SEC official who saw it all coming.
Clayton was warned by Grundfest that if the SEC initiated an enforcement action declaring XRP an unregistered security, in present day, these exchanges would have no choice but to delist and/or halt XRP trading from fear of an SEC action against them.
Like Abra’s CEO Bill Barhydt, Grundfest reportedly expressed concern because XRP “has been publicly traded in the U.S. and globally for SEVEN PLUS YEARS with the SEC’s full awareness and implicit permission. The SEC was aware that XRP was being actively traded on over 200 exchanges globally, including in the U.S.”
In addition, Deaton stated that there are no allegations of fraud or misrepresentation in the SEC’s complaint against Ripple Lab and its founders. Given this fact that no fraud was alleged and the fact that XRP had been allowed to trade for over 7 years, Grundfest reportedly pleaded with Clayton that “No pressing reason compels immediate enforcement action.”
As XRP investors know all too well, however, Clayton ignored this warning. As Deaton also writes, in the face of no pressing need, Grundfest “questioned the true motive of Clayton and the SEC.” Grundfest reportedly wrote that applying existing securities laws to XRP, but not ETH, “calls into question the Commission’s discretion.”
If today’s XRP is a security, so is ETH
According to Deaton, Grundfest basically “told Clayton and the SEC that if you file this case, claiming XRP is a security, it’s because of other reasons, unrelated to the law.” Deaton further asserts:
Clayton and others were well aware that the mere filing of the enforcement action, not limited to specific distributions of XRP directly from Ripple, but alleging that all XRP constitutes securities, could prove to be a KILL SHOT against Ripple and XRP.
Will Jay Clayton be appointed the new U.S. Attorney for the Southern District of New York?
In light of Deaton’s revelations, yesterday’s news that U.S. President Donald will nominate Jay Clayton to replace Geoffrey Berman as U.S. Attorney for the Southern District of New York also appears in a different light. As CNBC reports, Berman said he will not leave until Clayton is confirmed by the Senate, although Attorney General William Barr claimed that Berman is “stepping down.”