In a recent tweet, Ripple’s Chief Legal Officer, Stuart Alderoty, addressed the widespread confusion surrounding a recent ruling in the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and TerraForm Labs. The lawsuit involved a legal dispute over the classification of cryptocurrencies, particularly Ripple’s XRP.
The confusion stems from a ruling made by U.S. District Judge Jed Rakoff, who rejected TerraForm Labs’ attempt to use a previous decision by Judge Sarah Netburn Torres in the Ripple case as a legal precedent to dismiss the SEC’s lawsuit against the company and its founder, Do Kwon.
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Let me be clear about some confusion going around – the ruling in the Terra case changes NOTHING about the Ripple ruling that XRP is not a security. Also… https://t.co/PhaVix7HM4
— Stuart Alderoty (@s_alderoty) July 31, 2023
Judge Torres’ decision in the Ripple case drew a distinction between how Ripple sold XRP to investors. She ruled that Ripple’s sales of XRP to institutional investors were considered securities, while the company’s programmatic sales on digital exchanges were not securities.
TerraForm Labs’ Argument and SEC’s Countermotion
TerraForm Labs tried to utilize Judge Torres’ ruling as a basis to dismiss the SEC’s case against them. However, the SEC filed a countermotion stating that Judge Torres had erred in her ruling. In response, Judge Rakoff rejected Judge Torres’ decision, raising questions about Ripple’s previous victory.
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Judge Rakoff expressed the opinion that cryptocurrencies should not be classified differently based on how they are sold. This position has created confusion in the market and led to uncertainty surrounding the regulatory status of XRP.
Ripple’s Chief Legal Officer, Stuart Alderoty’s Response
Ripple’s Chief Legal Officer, Stuart Alderoty, took to Twitter to clarify the implications of Judge Rakoff’s ruling. In his tweet, Alderoty asserted that Judge Rakoff’s ruling does not alter the fact that XRP is not a security. He further argued that TerraForm Labs’ case is still in its early stages, and the presiding judge will likely accept most of the SEC’s allegations as true during this phase.
2/ I'll let others dive into the Terra Judge’s comment, including his apparent misreading of the Ripple Judge’s reasoning – ex: missing the point that secondary market traders can’t “invest money” in anyone or anything if they don’t know who they are buying from.
— Stuart Alderoty (@s_alderoty) July 31, 2023
Importance of Judge Torres’ Decision
Alderoty emphasized that Judge Torres’ ruling in the Ripple lawsuit was made after a comprehensive and exhaustive examination of a full factual record developed over a period of two years. This highlights the significance of the factual background in making such determinations in cryptocurrency-related legal cases.
Seeking to provide clarity on the matter, Ripple’s Chief Legal Officer encouraged other legal experts to analyze Judge Rakoff’s comment on the Ripple ruling. Alderoty welcomed input from prominent lawyer Jeremy Hogan, who expressed his intention to produce a video explaining the developments in the case.
The recent ruling by Judge Jed Rakoff rejecting TerraForm Labs’ attempt to use a previous Ripple case decision as a legal precedent has generated confusion in the cryptocurrency market. Ripple’s Chief Legal Officer, Stuart Alderoty, maintains that XRP is not a security, despite the recent developments in the TerraForm Labs’ case. As the situation unfolds, legal experts, including Jeremy Hogan, are expected to weigh in to provide further insights and analysis.