The crypto community went on a wild spin after news emerged that the U.S. SEC will sue Ripple for conducting an initial coin offering for XRP. Following the lawsuit, many firms have started distancing themselves from the digital asset. The lawsuit was released a day before Chairman Jay Clayton had announced his resignation. Joseph Grundfest, a former commissioner of the agency, now describes the lawsuit as an upheaval amid the upcoming changes in SEC officers and presidential administration in the coming months that can result in different perspectives.
Ripple Lawsuit’s Negative Consequences on Third Parties
Joseph Grundfest wrote a letter to Clayton filed on December 17 saying:
“The views of a soon-incoming Administration and Congress as to the regulation of transactions similar to those at issue can differ substantially from current perspectives.”
He said that the lawsuit could have a negative impact on innocent third parties related to the digital asset regardless of the resolution. Following the proceeding, intermediaries will cut off from XRP due to the associated legal risk involved. This will overall result in the loss of liquidity, causing XRP’s value further to decline.
Meanwhile, some market makers already have cut off liquidity support for XRP making way for potential billion-dollar loss.
Grundfest Is Also an Unpaid Advisor for Ripple
A source from Ripple further revealed that Grundfest is also an unpaid advisor for the firm.
The letter further highlighted:
“I am aware of no instance in which the simple announcement of a Commission enforcement proceeding has absent allegations of fraud, misrepresentation, or omission, caused multi-billion-dollar losses to innocent third parties. Creating precedent, and imposing losses, of this sort, raises public policy concerns that would benefit from the views of an incoming administration.”
The SEC lawsuit claimed that the sale and issuance of XRP was an unregistered security offering that gave Ripple co-founders the maximum control over the digital asset. XRP was trading down by more than 39% following SEC charges against the digital asset.