Several investors in XRP filed a lawsuit with the Rhode Island Court trying to alter the direction of the case against Ripple by the Stock and Exchange Commission.
In reaction to what it terms the “the most significant SEC enforcement action in modern history,” the Friday filing is an appeal for the “writ of mandamous.” The “mandamus” is, in essence, only a request that a federal official—in this situation, the President of the SEC—does his work. The filers are calling on the current acting president, Elad Roisman, to reverse the path that his predecessor, Jay Clayton, laid out by launching action against Ripple shortly before his departure.
The petitioners argue that the SEC’s action operates in defiance of its statutory mandate to protect investors:
“Instead of protecting investors and sharing information to help investors make informed decisions, as required by the mission statement, the Respondent knowingly and intentionally caused multi-billion-dollar losses to innocent investors who have purchased, exchanged, received and/or acquired the Digital Asset XRP, including the named Petitioners, and all others similarly situated.”
Strangely, the XRP investors have filed their case in Rhode Island, while the Ripple case is happening in the Southern District of New York.
The SEC initially filed its case against Ripple on Dec. 22 following many months of investigation into Ripple’s longstanding sale of XRP, which began in 2013. The petition from investors takes issue with the SEC’s timeframe in filing this action and further looks to set up a contrast between Ripple’s XRP and that owned by investors:
“It’s not just legally wrong and intellectually dishonest, but it is absurd to call the XRP held by thousands of innocent investors, who have absolutely no connection to Ripple or its executives’ securities.”
The use of an apostrophe rather than a comma, though accidental, is telling in its own way.
The overall purpose of the petition is to make the court order the SEC “to amend its complaint against Ripple to exclude the claim that the XPR owned by Petitioners constitute securities.” Such a move, while not benefiting Ripple, would, in principle, allow investors to re-trade their holdings freely. Anyone keeping any of the XRP’s circulating stocks knows that the SEC term has broken the bottom line.
The value of XRP has collapsed after the SEC started to implement it. Many exchanges have reported that they are withdrawing or delisting XRP, which has resulted in a liquidity crunch for investors. This is despite Ripple creator Brad Garlinghouse’s promise that the token will be fine in the case of such an operation.
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