SEC’s New Supplemental Letter of Authorization Endangers Ripple’s Fair Notice Defense
The U.S. Securities and Exchange Commission has filed a letter of supplemental authority in support of its motion to strike Ripple’s pivotal “fair notice” defense.
The pending petition, which could prove to be decisive in the hotly watched legal battle, was initially filed in April.
The agency cites a Dec. 20 verdict in the SEC v. Fife case, in which the Northern District of Illinois court delivered a blow to defendant John M. Fife by granting the SEC’s motion to strike his “fair notice” defense.
The SEC sued Fife and the five entities it controls in September 2020 for failing to register as a stockbroker in order to sell 21 billion penny newly issued shares which brought in an estimated profit of 61. millions of dollars.
The court has rejected the defendants’ argument about how the SEC was supposed to warn them about the novel interpretation of the term “dealer.”
The SEC now maintains that the ruling provides additional authority to kill Ripple’s key defense.
Ripple’s “fair notice” defense revolves around the premise that the regulator had failed to notify the company about its alleged violations of federal securities laws, while also bemoaning the broad definition of the term “investment contract.”
During the pre-trial phase of the case, Ripple’s lawyers also made it clear that the lack of clarity was damaging the industry as a whole.
On the day of the lawsuit’s one-year anniversary, CEO Brad Garlinghouse tweeted that cryptocurrency companies “shouldn’t be punished” for seeking regulatory clarity.
In its strike motion, the SEC claimed that it had “unmistakably” enforced securities laws within the cryptocurrency industry using coercive measures, letters of no intervention, speeches and advice from staff.
