John Deaton Highlights SEC’s Schizophrenic Defense in Ripple Case
- The crypto lawyer believes that the securities regulator is coming up with schizophrenic defenses for its claims.
- The lawsuit against Ripple has seen the SEC change its claims more than three times.
Crypto Law’s John E Deaton has accused the U.S. Securities and Exchange Commission (SEC) of presenting Schizophrenic defenses in the lawsuit against blockchain solutions firm Ripple. Deaton recently highlighted the securities regulator constantly changing claims against Ripple regarding what constitutes a common enterprise.
John Deaton took to Twitter earlier today to list what he called “ridiculously overboard” claims made by the Securities and Exchange Commission in the lawsuit filed against Ripple back in December 2020. The majority of these claims were made in an effort to satisfy the controversial Howey Test by proving the existence of a common enterprise.
The Howey Test comes into effect if there is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. Deaton reminded his followers that the SEC initially claimed that the common enterprise in the lawsuit was Ripple.
This claim was conceded by the securities regulator after Ripple proved that XRP holders received no interest in the blockchain firm by owning XRP. This prompted the SEC to change its theory and claim that the entire XRP ecosystem constituted the common enterprise. This included all XRP holders, the exchanges that listed XRP, and vendors that accepted XRP as a form of payment.
In order to strengthen the new claim, the securities regulator relied on the testimony of an expert witness who testified that all XRP holders must rely on Ripple. However, this argument was excluded by the judge overseeing the case.
This led to the SEC changing its claim once again to what Deaton described as a “schizophrenic defense”. As per the SEC’s latest theory regarding the existence of a common enterprise, XRP itself represents the common enterprise in question, which John Deaton believes is an insane argument.