Hundreds of XRP holders joined attorney John Deaton’s class action lawsuit against the United States Securities and Exchange Commission (SEC) this weekend.
As of Monday, August 8th, 70,100 XRP holders have signed a class action lawsuit against the SEC, said attorney John Deaton in his tweet addressed to SEC Chairperson Gary Gensler and the SEC Enforcement Director.
According to Deaton, XRP holders from all 50 states of the U.S. and 141 countries worldwide have joined forces to fight the SEC’s “unlawful expansion of Howey”. “You will lose the war”, declared Ripple’s attorney.
70,100 as of now. @GaryGensler & @SECEnfDirector over 70K #XRPHolders from diverse backgrounds from all 50 states, every U.S. territory, and 141 Countries around the have joined together to fight your unlawful expansion of Howey. You will lose the war. https://t.co/FHr5HkUxOh— John E Deaton (210K Followers Beware Imposters) (@JohnEDeaton1) August 8, 2022
Over 200 new XRP holders signed for the class action lawsuit less than 12 hours after the attorney’s note that the lawsuit was only “101 people away from 70K” on Sunday, August 7th.
“What’s most amazing about hitting 70K holders is that this has been a 100 percent organic evolution or maybe revolution”, Deaton remarked.
The attorney called back to the very first day of 2021, when only 7 XRP holders signed the class action lawsuit. A little more than 20 months later, that number has increased more than 10,000 times over.
Disagreements on a Howey Test
The legal battle between the United States SEC and Ripple Labs began at the very end on 2020, when the regulating authority filed a $1.38 billion lawsuit against Ripple Labs and its executives over the alleged sale of unregistered XRP “securities”.
According to the SEC, Ripple Labs raised funds via an initial public offering (IPO) in 2013, where it sold XRP as unregistered securities, thus violating the ‘U.S. Securities Act’. The act, established in 1933, revolves around The Howey Test as a determinant as to whether an investment qualifies as a security under federal law.
The test typically considers an asset to be a security when it meets the criteria of being an investment of money, investment in a common enterprise, or an investment with an expectation of profit derived from the efforts of others.
According to the SEC, XRP matches the standards of Howey Test, and should be therefore be qualified as a security and registered with the SEC.
For its part, Ripple Labs rebuffed the SEC’s claims that the XRP quailifies, asserting that it is not to be considered a security. The company thus entered into a legal battle with the SEC in March 2021, alleging that the regulator had neither warned, nor notified it that XRP could be considered a security.
Ripple highlights that ex-SEC Chairperson William Hinman confused the company in 2018 when he publicly clarified that Ethereum (ETH) sales were not security transactions. The statement thereby triggered interpretation across the market that it was an official ruling of the regulator’s view on digital currencies.
Reason For A Class Action Lawsuit
Soon after the SEC sued Ripple for selling XRPs as unregistered securities, several crypto exchanges, including the US’s biggest Coinbase (NASDAQ:COIN), started to delist XRP tokens.
The move immediately triggered an XRP price crash when the token lost more than 63% of its value and dropped to the level of $0.21 at the very end on 2020.
Attorney John Deaton then initiated a class action lawsuit against SEC, hinting that its unprecedented move led to billions of dollars in losses that investors have faced because of the XRP delistings.
On the Flipside
- The eyes of the crypto world are upon the notorious SEC vs Ripple lawsuit, as it is expected to set a precedent for the treatment of cryptocurrencies under regulatory oversight. However, Ripple Labs is not the sole high profile target to be under the lens of the SEC. The regulator is currently probing Coinbase for the alleged listing of unregistered tokens.
Why You Should Care
The valuation of Ripple recently created a buzz after the world’s biggest wealth manager, BlackRock (NYSE:BLK), announced a partnership with crypto exchange Coinbase to expand the digital asset market for institutional clients. The Head of BlackRock’s Digital Asset division, Robert Mitchnick, is a former Ripple executive.
For more information on the SEC vs Ripple case, check out:
SEC Vs Ripple: Hinman Related Hearing Suicidal for SEC?
Learn more about which tokens the SEC considers securities:
SEC Allegedly Identifies Nine Unregistered Securities on Coinbase