Non-US XRP Investors Target the SEC With Conflict of Interest Claim
It’s been a rocky road for Ripple Labs, two of its executives, and XRP. Back in 2020, the U.S SEC filed a lawsuit alleging that Ripple Labs and two executives raised more than $1.3bn through an unregistered and ongoing digital asset securities offering.
The SEC-Ripple Lawsuit and Empower Oversight
Late last year, market sentiment towards the case and appetite for XRP flipped. News of a non-profit government watchdog, Empower Oversight, filing a lawsuit against the SEC provided market hope of a more favorable outcome to the SEC lawsuit. Empower Oversight’s claim highlighted a clear conflict of interest. The SEC filed a claim against Ripple Lab but not Ethereum (ETH).
Empower Oversight claims that former SEC official William Hinman received millions of dollars from his former employer while helping guide the SEC’s regulation of cryptocurrencies. His former employer, Simpson Thacher, is part of a group that promotes Enterprise Ethereum.
The lawsuit claims that Hinman said that Ethereum wasn’t a security, which caused an ETH price spike. This was then followed by a lawsuit against Ripple Lab, leading to a sliding in the value of XRP. The lawsuit against Ripple Lab claims that XRP is a security”.
Since early January, however, news updates have been relatively quiet on both the SEC-XRP and Empower Oversight-SEC claims. Last week, news did hit the wires, however, of the SEC obtaining more time to handle documents. The courts gave the SEC an extension until 17th February to handle documents that could favor Ripple Lab.
A New Twist Will Further Test the SEC’s Claim
While the SEC has until 17th February, there’s an activity in the background as the case reaches its final rounds. This week, news hit the wires of lawyers petitioning for non-US XRP investors to demand an investigation into the SEC’s actions against Ripple Lab.
The petition claims that “the SEC enforcement actions on cryptocurrencies have involved the appearance of improper ties and conflicts of interest among officials, and should be investigated”. Importantly, the petition also points out that petition attorney John Deaton “has compiled evidence that SEC officials may have colluded with outside parties to regulate cryptocurrencies in line with their personal financial interests”.
Finally, according to the petition, the “SEC under Gary Gensler has also refused to address these troubling questions, resisted Freedom of Information Act (FOIA) requests, and ignored media reports”.
Earlier in the year, SEC Chair Gary Gensler had warned the crypto market of a marked increase in regulatory scrutiny. The latest petition, coupled with Empower Oversight’s claims could put the SEC and its approach towards cryptos under the microscope. It isn’t the best timing for lawmakers, with the White House due to imminently issue an Executive Action on crypto regulation.
Ripple’s XRP Price Action
At the time of writing, XRP was down by 0.21% to $0.6162. In spite of improved sentiment towards the SEC lawsuit, XRP was down by 26% year-to-date to Monday’s close. Significantly, XRP was also down by 56% from early September’s most recent high. Alongside sentiment towards the SEC lawsuit, bearish sentiment across the broader crypto market has also weighed.
Near-term, a move back through January’s high $1.016 would give XRP a run at September’s high $1.415. In the coming weeks, market sentiment towards the SEC-Ripple Lab case, however, will remain a key driver.