In a letter to Federal Judge Analisa Torres, Ripple Labs has responded to the U.S. Securities and Exchange Commission's anticipated motion to strike the blockchain company’s pivotal “fair notice” defenses, describing it as “meritless”:
The SEC’s anticipated motion to strike is meritless. The striking of affirmative defenses is disfavored in this Circuit and the SEC cannot remotely meet the high burden of showing that there is no question of fact or law that might allow the defense to succeed.
It is asking the court not to set a joint briefing schedule for CEO Brad Garlinghouse’s and co-founder Chris Larsen’s motions to dismiss the lawsuit and the SEC’s motion to strike them:
Should the SEC proceed with filing this meritless motion to strike, Ripple respectfully requests that this Court set its default briefing schedule unlinked to the individual defendants’ motions to dismiss – as one has no bearing on the other.
Ripple stands its ground
As reported by U.Today, the SEC claimed that Ripple’s defenses were “legally improper” since it wasn’t obliged to warn exchanges about the company’s violations while it was still in the process of investigation.
According to Ripple’s lawyers, however, the agency’s past enforcement actions and statements indicated that XRP wasn’t a security:
Market participants reasonably understood, based on the statutory language, case law, prior actions by other regulators, and enforcement actions and public statements by the SEC and SEC officials that XRP was not a security and, for years, the SEC provided no contrary indication as the XRP market flourished.
Ripple once again stressed that the Financial Crimes Enforcement Network had declared XRP to be a virtual currency despite the SEC pointing out that its 2015 settlement with the FinCEN didn’t exempt the company from complying with security laws.
This lack of fair notice was compounded by the 2015 settlement between Ripple and FinCEN and U.S. Department of Justice – declaring XRP to be a “convertible virtual currency,” a classification fundamentally incompatible with XRP being a security.