Terraform Labs and XRP: SEC’s Legal Pursuit Sparks Market Uncertainty

Posted on by Dorah Lilian
Estimated read time 5 min read
  • Recently, SDNY District Judge Jed Rakoff delivered a significant setback to the XRP case, allowing the SEC to move forward with its legal action against Terraform Labs and Do Kwon.
  • In the wake of the ruling, XRP’s market capitalization took a massive hit, losing over $2 billion in a mere seven days.

In a recent turn of events, SDNY District Judge Jed Rakoff dealt a blow to the XRP case, paving the way for the SEC to proceed with its legal action aga inst Terraform Labs and its founder, Do Kwon. The judge’s decision marks a major setback for XRP and highlights the ongoing regulatory challenges in the cryptocurrency world.

The court’s decision in Terraform Labs’ case was brought to the public’s attention by John Reed Stark, a former SEC attorney renowned for his insights into the crypto industry. Stark shared the news on Twitter, shedding light on Judge Rakoff’s ruling against the motion to dismiss the SEC’s lawsuit. Terraform Labs and Do Kwon’s lawyers had sought to dismiss the case, citing the Ripple precedent and arguing that the assets under scrutiny did not fall under the SEC’s jurisdiction as securities.

In a surprising turn, the SEC vehemently opposed following Judge Analisa Torres’s reasoning from the Ripple case and expressed its intent to appeal the decision. This firm stance emphasizes the SEC’s dedication to regulatory enforcement and maintaining oversight over the evolving crypto landscape.

Judge Rakoff’s Ruling and its Ripple Effects

Judge Rakoff’s ruling denying Terraform Labs’ motion to dismiss the SEC lawsuit holds far-reaching implications. The ruling signifies the SEC’s belief that it has the authority to pursue the case and potentially extends its reach to other digital assets like TerraUSD (UST), the Anchor Protocol, and LUNA, suspecting violations of securities laws. This decision has reverberated across the cryptocurrency market and sparked concerns among investors and market participants.

In the wake of the ruling, XRP’s market capitalization took a massive hit, losing over $2 billion in a mere seven days. Just a week ago, XRP boasted a market cap of over $37 billion and traded above $0.7. However, the recent downward spiral has led to a significant decline in value, with XRP currently trading at approximately $0.66, representing a seven-day cumulative drop of over 7%. As a result, its market cap now stands at $34.87 billion, a stark contrast to its once-ascendant position.

Traders and investors are closely monitoring the situation, with trading volumes potentially falling below $1 billion. This uncertainty underscores the need for greater regulatory clarity in the cryptocurrency space.

Plot Twist: Empower Oversight Unleashes Revelations

Empower Oversight, a fearless watchdog group committed to upholding transparency, has thrown the XRP community into a frenzy with their latest Freedom of Information Act (FOIA) triumph. The group has uncovered a treasure trove of documents shedding new light on the controversial cryptocurrency speech delivered by former SEC Director of Corporation Finance, William Hinman, on June 14, 2018.

Amidst the array of documents released on August 3, 2023, one name emerges as the driving force behind Hinman’s decisions – Ethereum co-founder Joseph Lubin, along with his company, Consensys. These documents have exposed Lubin’s more profound involvement in shaping Hinman’s thinking and objectives during the contentious speech.

Also Read: RIPPLE VS SEC: WHEN WILL HINMAN’S DOCUMENTS BE UNSEALED?

The chain reaction of Hinman’s speech has reverberated through the ongoing Ripple case, where the SEC has claimed that certain cryptocurrencies, including XRP, were unregistered securities. Empower Oversight’s revelations amplify the urgency to revisit the impact of that historical speech and its implications on the crypto market.

 

 Conflicts of Interest Uncovered

The documents further unveil a clandestine meeting between Hinman and Chris Lin, a partner at Simpson Thacher. The revelation raises eyebrows as it seemingly contradicts advice on conflicts of interest rules. The SEC Ethics Office had previously cautioned Hinman about potential conflicts, given his financial ties with Simpson Thacher while serving at the SEC.

Empower Oversight’s relentless pursuit of transparency has emboldened them to launch multiple FOIA requests and lawsuits, striving to compel the SEC to disclose vital documents related to its decision-making process on critical cryptocurrency matters.

Conclusion

SDNY District Judge Jed Rakoff’s ruling in the XRP case has triggered widespread repercussions in the cryptocurrency industry. The decision to proceed with the SEC’s case against Terraform Labs and its founder highlights the evolving challenges surrounding digital assets’ classification and regulation. Furthermore, the crypto community eagerly awaits further insights and analyses, hoping for a potential resurgence in XRP’s market performance.

As these revelations come to light, the crypto community braces itself for the far-reaching implications they may bear on future regulations and crypto markets. Empower Oversight’s tenacity reminds us that vigilance is essential to hold regulatory bodies accountable and protect the interests of crypto enthusiasts worldwide.

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Dorah Lilian

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