Ripple Lawsuit: Legal Scholar Warned SEC of Systemic Risk
A letter from December 2020 has surfaced, revealing that Joseph Grundfest, a renowned American legal scholar and former SEC commissioner, advised Jay Clayton, the former SEC commissioner, not to sue Ripple. Grundfest argued that such a lawsuit would pose a systemic and international risk that could harm innocent XRP holders.
The letter was published by John E. Deaton from Crypto Law US, who also highlighted the contradictions and unethical practices of Jay Clayton and other SEC representatives.
Grundfest’s Warning of Ripple Lawsuit Consequences
In his letter, Grundfest emphasized that initiating legal proceedings against Ripple would cause all parties and intermediaries to stop transacting with XRP. This would result in a liquidity crunch, impacting the token’s price and causing significant losses for innocent third parties.
The letter also emphasized the importance of XRP as one of the largest cryptocurrencies in the market at the time. It had a market capitalization of approximately $23.8 billion on December 16, 2020, making it the third-largest coin. Grundfest stated that a lawsuit against Ripple would have broad policy implications and significant consequences for the financial and securities markets.
Clayton’s Intimidation Tactics
Deaton referenced an interview in which Jay Clayton mentioned his preference for suing company executives even in non-fraud cases as it “changes the dynamics.” Deaton interpreted this as an intimidation tactic aimed at Ripple’s main executives, Brad Garlinghouse and Chris Larsen. Grundfest warned against engaging in such practices as they raise the burden on the government.
ETHGate?
Grundfest also criticized the SEC’s fairness and true intentions behind the lawsuit. He questioned why Ethereum (ETH) had not been treated the same way as XRP if they were similar, and why federal laws were not enforced against ETH.
Grundfest argued that if there was no material distinction between ETH and XRP, both should either freely circulate in the market or be subject to the same federal laws. Deaton referred to Grundfest as the “first ETH conspiracy theorist” due to his apparent preference for ETH over XRP.
Hot Take: Ripple Lawsuit and FedNow
There has been speculation on Crypto Twitter that the SEC’s lawsuit against Ripple was part of a coordinated effort with the Federal Reserve (Fed) to push Ripple and XRP away. The theory suggests that the Fed aims to promote its payment rail, FedNow, as the primary instrument for cross-border transactions and liquidity sourcing for institutions, instead of relying on Ripple and XRP.
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