Attorney John Deaton has slammed the US Securities and Exchange Commission (SEC) for showcasing hypocrisy in the ongoing lawsuit over Ripple’s XRP escrow accounts, stating that locking the escrow accounts will never happen.
Deaton made this statement after an ex-SEC director, Marc Fagel, pointed out that it’s reasonable for the judge to lock Ripple’s escrow forever.
In a tweet a couple of hours ago, the pro-XRP attorney stated that the SEC asked Ripple to sell additional XRP to obtain funding for its defense, despite its accusation of violating securities laws by selling XRP.
Deaton tweeted, “Locking Ripple’s escrow forever will never happen. The SEC didn’t seek a preliminary injunction…
Locking Ripple’s escrow forever will never happen. The SEC didn’t seek a preliminary injunction. The SEC seeks $1.3B and a permanent injunction from Ripple and its executives from violating Section 5 in the future. Ironically, during the case, when Ripple objected to how… https://t.co/qldCwg31Sz
— John E Deaton (@JohnEDeaton1) July 10, 2023
Sarah Netburn, the presiding Judge over the XRP lawsuit, has previously called out the SEC for its duplicity, according to Deaton.
Last year, Netburn denied the SEC’s request to keep certain emails from former SEC officer William Hinman private. She also chastised the SEC in her judgment for taking litigation positions to further its desired goal and not out of faithful allegiance to the law.
According to Deaton, Judge Torres will not lock Ripple’s XRP escrow accounts. He noted that the SEC is seeking $1.3 billion in damages and a permanent injunction against Ripple, and Torres would be unlikely to award such a punitive penalty.
If Ripple loses at summary judgment, Deaton believes there may be a penalty phase in which Judge Torres fines or disgorges the company’s profits. Ripple would then file an appeal, and the litigation might last for years.
The pro-XRP lawyer also hinted at Congress intervening during the appeal and imposing clarification for the cryptocurrency business. If Congress passes clarification, it may render Judge Torres’ summary judgment moot.
Deaton concluded by stating that unless and until Judge Torres announces her judgment, the XRP escrow accounts will stay intact:
“If Ripple loses at summary judgment there will be a penalty phase and the judge could fine Ripple, disgorge Ripple from any profits (minus legitimate business costs), and enjoin them by ordering not to do it again.
“Then Ripple would appeal with the status quo (operate the same way it has the last 3 years) in effect. Congress could enact clarity making it all moot or Ripple could win on appeal. The escrow, IMO, remains intact, absent a settlement after Judge Torres issues her ruling.”
The Ripple lawsuit is still ongoing, and it is unknown how it will be resolved. Deaton’s statements, however, show the hypocrisy of the SEC’s lawsuit against Ripple and signal that the XRP community may ultimately prevail.
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What Does This Mean for Crypto’s Future?
The SEC’s action against Ripple has far-reaching ramifications for the future of cryptocurrency. If the SEC prevails, it may set a precedent that makes it much more difficult for other Bitcoin companies to operate in the US.
The SEC’s complaint is based on a similarly restrictive definition of a security. If successful, it may hinder the launch of new cryptocurrencies since they would all be subject to the same stringent restrictions.
This could potentially have a chilling effect on the growth of the crypto industry. However, there is a possibility that the SEC’s lawsuit may be dismissed or that Congress will intervene to provide clarification for the industry.
Only time will tell the outcome of the SEC’s case against Ripple. Nonetheless, the lawsuit has already raised significant concerns about the future of crypto regulation.
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