U.S. Securities and Exchange Commission (SEC) chairperson, Gary Gensler’s approach toward building clear regulation for the digital asset industry has constantly been under scrutiny. However, Gary’s recent speech at the 2023 Securities Enforcement Forum has become a debatable topic among the top crypto lawyers. Ripple’s legal chief highlighted a major flaw in the implication of the SEC chair.
Enforcement actions & accountability: SEC’s Stance
SEC chair Gary Gensler addressed various aspects of the Commission’s enforcement efforts and priorities. He discussed the watchdog’s approach to the crypto asset securities market. However, he stressed on the cruciality of considering economic realities with investor protection.
Gensler mentioned that the commission does not enforce securities laws based solely on the label of a product but looks at the underlying economic realities. He expressed concern regarding a wide range of noncompliance in the digital asset markets which eventually leads to issues such as fraud, scams, money laundering and even bankruptcy. SEC chair suggested that there are many cases where crypto assets likely meet the investment contract test and make them subject to securities laws.
He acknowledged the enforcement actions taken under his tenure against actors in the crypto space which includes both settled and in-litigation cases. However, the SEC chair emphasized the need for accountability. He stated that individuals and firms violating securities laws would face various penalties, including bars, fines, and injunctions. Gensler added it is important that both firms and individuals should be held accountable in order to protect the public and ensure market integrity.
While addressing the 2023 Securities Enforcement Forum, Gary Gensler touched upon the commission’s focus on some high profile cases. He mentioned why it is important to address various types of fraud and misconduct that impact investors.
Ripple’s reply: flaws & outrage
Stuart Alderoty, Ripple’s chief legal officer found several statements from this speech that might form wrong implications ahead. He highlighted that Gensler suggested that a crypto project retaining a lawyer is a security. Alderoty stated that it’s wrong as a matter of law, not to mention common sense. He added that this not-so-subtle and outrageous threat to everyone’s right to consult with counsel.
John Deaton, XRP holders’ lawyer in the Ripple vs SEC case stated that he tried to read the speech given by Gensler and couldn’t able to continue reading ahead as he found it wrong in many ways. However, he also mentioned the SEC’s continuing losing streak in the court.
As reported, Ripple’s CLO shared the commission’s ongoing losing streak as the 2nd Circuit court gave out a judgment in the SEC v Govil case. The court asserted that the SEC cannot seek a substantial disgorgement award without first demonstrating actual financial harm to investors, setting a precedent of ‘no harm, no foul.’
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