Ripple Labs has filed its response to the SEC’s amended complaint filed from mid-February.
Ripple Labs again goes on the counterattack, setting out 7 affirmative defenses, including the lack of likelihood of future violations and statute of limitations on civil claims.
After Ripple’s legal team declared its intention to file motions to dismiss the SEC’s amended individual complaints against Brad Garlinghouse and Chris Larsen yesterday, the company has now filed a response to the amended complaint a few hours ago. Ripple’s general counsel shared the link to the 100-page document on Twitter and commented:
Today Ripple filed our answer to the SEC’s amended complaint. Notably w/ full transparency to the SEC: XRP was listed on 200+ exchanges, billions of $ in XRP were bought/sold monthly, many market makers had daily XRP txns, & 3rd party products (not developed by Ripple) used XRP.
We’re looking forward to learning more about the SEC’s meetings with major XRP market participants who asked for guidance but were never told that XRP txns would be subject to the federal securities laws. Full filing here 2/2 https://ripple.com/wp-content/uploads/2021/03/51-Answer-of-Def.-Ripple-Labs-Inc.-to-Pls.-FAC.pdf
In the preliminary statement, Ripple Labs’ attorneys provide 16 reasons why XRP is not a security, arguments that are familiar from previous correspondence and offer little that is new. Ripple Labs states that the “the complaint filed by the SEC advances an unprecedented and ill-conceived legal theory — with neither statutory mandate nor congressional authorization.”
Further, Ripple cites familiar arguments, including that no other securities regulator in the world classifies XRP as a security; that the U.S. Department of Justice (“DOJ”) and FinCEN determined in 2015 that XRP was “lawfully used in the marketplace as a virtual currency”; and that Ripple did not sell or distribute XRP as an investment contract. With respect to the last point, Ripple draws comparisons to oil and gold:
Ripple holds a large percentage of XRP, but that alone does not and cannot render it an investment contract. Many entities own large amounts of commodities and participate heavily in the commodities markets — Exxon holds large quantities of oil, De Beers owns large quantities of diamonds, Bitmain and other Chinese miners own a large percentage of outstanding bitcoin.
In the 88 pages that follow, Ripple’s legal team addresses each of the SEC’s arguments – 442 statements in total.
Ripple lashes out again in counterattack
On the last 4 pages, however, Ripple goes on the counterattack again, making 7 “Affirmative Defenses.” Ripple asserts and makes the following defenses.
- The complaint does not state a claim upon which relief can be granted.
- XRP is not a security.
- No likelihood of future violations.
- Lack of due process and adequate notice.
- Exemption from registration (sales of XRP by Ripple were exempt from SEC registration requirements).
- Lack of extraterritorial jurisdiction (transactions outside the United States).
- Statute of Limitations: Plaintiff’s claim and Plaintiff’s claim for civil monetary penalties are barred in whole or in part by an applicable statute of limitations.
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