Former SEC Commissioner, Joseph Grundfest, reportedly warned the then-acting commissioner, Jay Clayton, and the SEC that filing a lawsuit against Ripple Labs could potentially cause billions of losses to investors. Grundfest apparently questioned what went behind the true motives for the regulatory agency in filing a legal action against Ripple.
Joseph Grundfest Questioned True Motives of Ripple Lawsuit
John E. Deaton, a cryptocurrency lawyer posted a thread on Twitter highlighting that the SEC was warned by Joseph Grundfest, a former SEC commissioner under U.S. President Ronald Reagan.
The lawsuit was filed just days after the departure of SEC Chairman Jay Clayton. This creates a question of concerns on suspected unknown motives on the regulatory agency behind filing the lawsuit.
Reportedly, Grundfest sent Clayton a letter before filing the lawsuit, warning of the consequences of billions of losses. According to Deaton, it was a direct quote from the former SEC official:
“Declaring XRP an unregistered security would result in an unprecedented scenario of billions of dollars in losses resulting from an exodus of intermediary market service providers.”
Clayton was warned by Grundfest that if the SEC initiated an enforcement action declaring XRP unregistered security, the exchanges would have no choice but to delist and/or halt XRP trading in retaliation against the XRP lawsuit.
XRP Traded with Full Permission of SEC
Grundfest reportedly expressed concern because XRP has been publicly traded in the U.S. and globally for over seven years with full permission. He even added that the SEC was well aware that XRP was being actively traded on over 200 exchanges globally, including the United States.
Grundfest reportedly wrote that applying existing securities laws to XRP, but not ETH, calls into question on SEC’s decision on the lawsuit. Deaton added in the Twitter thread:
Clayton and others were well aware that the mere filing of the enforcement action, not limited to specific distributions of XRP directly from Ripple, but alleging that all XRP constitutes securities, could prove to be a KILL SHOT against Ripple and XRP.