Lawyer for 11,000 XRP holders pushing to fight SEC in Ripple lawsuit

As Ripple and SEC intensify their legal battles, attorney John Deaton and his clients are trying to jump into the fray. Will XRP investors get their day in court?

After the SEC filed its lawsuit, XRP prices initially plunged to as low as US$0.2 but has since rebounded, recently climbing past the US$1 mark for the first time since February of 2018 after U.S. District Court Magistrate Judge Sarah Netburn directed the SEC to produce documents containing the commission’s internal discussions on Bitcoin and Ether. 

Prior to Ripple’s discovery victory, U.S. District Court Judge Analisa Torres granted Deaton and XRP holders their request to file a formal motion to intervene as a third party in the court battle between SEC and Ripple. They now have until April 19th to do so.

“I’m shocked that the government has not come out and declared affirmatively, ‘No, we’re not claiming that XRP is unregistered security, we’re only claiming the way that Ripple sells it [and] markets it is a security,’” Deaton said. “If they would come out and classify that and make that distinction, me and my 11,000 people that I know I represent and I’m speaking for would go about our business and not try to be involved in this suit.”

The SEC had tried to block Deaton and his clients’ from intervening in the lawsuit, alleging financial motivations behind the request. “As movant Deaton has stated elsewhere, the purpose of relisting appears to be so that XRP’s price could double,” the SEC had argued to the court, unsuccessfully. 

As Ripple and SEC intensify their legal warfare, attorney John Deaton and his clients want in. Will XRP investors get their day in court? Timestamps: 0:00 – Intro 1:29 – Why did you take this case? 3:13 – Divergence of opinions on XRP 9:10 – Lawyer’s perspective on SEC vs Ripple 12:01 – Reality of XRP holders 15:39 – Responding to the SEC’s allegations against Deaton 19:52 – Significance of SEC vs Ripple 27:09 – Impact on the future of crypto 33:57 – Bifurcation of the crypto industry 36:34 – Deaton’s message to his clients

“That letter by the [SEC] is quite possibly the most misleading letter that I’ve ever seen submitted to a judge,” Deaton said. 

Shortly after the SEC’s lawsuit against Ripple was filed, major exchanges in the U.S., such as Binance and Coinbase, delisted or halted the trading of XRP. But in Asia, it was business as usual for XRP. Japanese financial firm SBI’s subsidiary Morningstar even extended XRP as part of a dividends program, and SBI’s crypto arm SBI VC Trade added XRP to its digital currency lending service. 

XRP investors also flocked to social media to urge crypto exchanges to relist their asset in a movement known as “#RelistXRP,” and Deaton joined in on social media to question the likelihood of U.S. exchanges relisting XRP while Ripple remains mired in litigation. 

“I made a comment where I said, ‘are you really confident that the [SEC] is going to advise the exchanges that you can relist XRP? Because if they do, who knows? The price might double and then Ripple would have twice the amount of resources to fight the SEC. That’s the direct quote,” Deaton said. 

“I don’t really think that the SEC has clearly distinguished between Ethereum, for example, and XRP,” Deaton said.

Watch Deaton’s full interview with Forkast.News Editor-in-Chief Angie Lau to learn more about how the SEC’s lawsuit against Ripple has affected XRP investors, what this case could mean for the legal future of other cryptocurrencies,  and why — despite the lawsuit’s potential precedent-setting impact — Deaton has been disappointed with the industry’s lack of support. 

Highlights:

  • Deaton does not represent Ripple: “I’m not here to defend Ripple, I’m here as XRP investors. I also want to add that it’s not just investors that I represent it. I represent businesses that utilize the token itself in the operation of their business. They’re not holding XRP so that it appreciates in price and that they sell it. They’re using it operationally themselves. That is a class of individuals that the SEC has no duty to.”
  • What’s behind the SEC’s lawsuit? “I believe you have regulatory agencies doing what we call the jurisdictional grab. They want to be a part of it. They want to extend their reach to this asset class. Even today, you have the Commodities Future Trade Commission going after individuals using Dogecoin and other cryptocurrencies. Yet, you also have them saying that Ether and Bitcoin are commodities. And then you have the Securities Exchange Commission claiming the XRP is a security. That kind of regulatory confusion or schizophrenia, if you will, is where we’re at today. Unfortunately, the United States is falling way behind other parts of the world.”
  • The real victims of the SEC’s lawsuit, according to Deaton: “Some of the stories are absolutely heartbreaking…. And the stories that I’ve read are heart-wrenching people who inherited US$50,000, their father’s life savings and decided to do what I said earlier, where they just put it all in the top three, or maybe they listen to someone and made the mistake of putting it all in XRP and then to see the price depreciate by 75% and then be halted.”
  • Potential impact on other cryptocurrencies: “They’re using this case as a way to test their theory. Since this case was filed, another case was filed by the SEC against LBRY. In the last few days where they’re alleging that that cryptocurrency is also a security. And so this case is going to provide clarity because I will tell you this, that if the SEC is successful in declaring and getting XRP deemed a security, then get in line. Whether it’s XLM or Cardano or Algo — I don’t mean to discriminate [against] any other cryptocurrency — including possibly Ether. Get in line because the government’s going to come knocking on your door.”
  • What kind of support have XRP holders received from others in the industry? “I’m actually disappointed in the industry because there’s too much tribalism…. This case is going to dictate the policy going forward with cryptocurrencies in the United States and the other projects are sitting back and waiting with bated breath on the outcome. But there’s no unity amongst the projects. It’s the Bitcoin maximalists believe Bitcoin is the chosen one and anything else is just not a good token and a waste of time.”