Brad Garlinghouse, the CEO of Ripple, has taken aim at Jay Clayton, the former SEC chair, following Clayton’s recent comments on the SEC’s crypto regulatory approach.
Clayton Expresses Concern Over SEC’s Enforcement Actions
On June 28, 2023, in an interview with CNBC, Clayton expressed unease about the SEC’s current enforcement methods against crypto companies. He urged the regulatory body leaders to pursue actions against crypto entities only if they have a solid legal basis.
Gemini’s co-founder, Cameron Winklevoss, first shared this interview, triggering a wave of reactions in the crypto community. Garlinghouse’s response came a week after the SEC withdrew its charges against him and Ripple’s co-founder, Chris Larsen.
Ripple Chief Fires Back
Garlinghouse pointed out that, under Clayton’s watch, the SEC had accused Ripple and its executives of securities law violations, only for Clayton to exit the agency a day later. Clearly angered by Clayton’s interview, Garlinghouse didn’t mince words, lambasting the ex-SEC chair’s “shocking hypocrisy” and dismissing his comments as“bulls**t.”
SEC’s Legal Battle with Ripple
On December 22, 2020, with Clayton at its helm, the SEC accused Ripple of breaking securities laws. The regulatory body also took legal action against Garlinghouse and Larsen, alleging they assisted Ripple in offering XRP, which they considered an unregistered security, to investors.
However, after a gruelling two-year legal skirmish, a New York federal court determined that Ripple only broke the law when it sold XRP to institutional investors. The court did not classify Ripple’s other XRP sales and distributions as securities.
Despite preparations for a trial against Garlinghouse and Larsen next year, the SEC unexpectedly withdrew the charges.
Why Did the SEC Withdraw Charges Against Ripple’s Executives?
The unexpected decision by the SEC to drop charges spurred a myriad of speculations in the crypto space. Many believed the intricate nature of the case influenced the decision.
John Deaton, the founder of Crypto-Law, recently tweeted about two primary reasons for the SEC’s move. According to Deaton, the SEC might have realized its slim chances of winning the case.
Furthermore, the potential witnesses for the trial deposition might have deterred the SEC. Deaton mentioned that the trial might have seen Clayton and former SEC Director, William Hinman, subpoenaed. While Deaton felt confident about Hinman testifying, he doubted the possibility of Ripple successfully summoning an ex-SEC chair for trial.
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