In a recent Twitter exchange, John E Deaton, the founder of Crypto-Law.us and Deaton Law Firm, unleashed a scathing critique of the U.S. Securities and Exchange Commission (SEC). Deaton accused the SEC of breaking the law and failing to protect investors in the aftermath of the Ripple lawsuit.
Deaton’s tweet was prompted by a statement from Lawyer Jake Chervinsky, Chief Policy Officer at Blockchainassn, who highlighted a significant development. The Government Accountability Office (GAO) had reviewed SAB 121, a controversial anti-crypto accounting bulletin issued by the SEC in March, concluding that it constitutes a “rule” under the Congressional Review Act (CRA) and the Administrative Procedure Act (APA). The SEC, however, had not complied with either.
SAB 121 required crypto custodians to double-count digital asset liabilities on their balance sheets, leading to severe damage to the crypto industry and incurring substantial legal and consulting fees over the past 18 months. Deaton and Chervinsky contended that the bulletin was illegal from the outset and called for its immediate withdrawal by the SEC.
Deaton’s strong criticism extended to the SEC itself, accusing the agency of becoming both inept and corrupt, stating that it does more to harm investors than protect them.
Joseph Grundfest’s Opposition to the SEC’s Ripple Lawsuit
Meanwhile, it came to light that Joseph Grundfest, a former SEC commissioner and a current professor at Stanford Law School, vehemently opposed the SEC’s lawsuit against Ripple. In a letter penned in December 2020, Grundfest expressed concerns about the lawsuit’s potential ramifications on the financial and securities markets. He argued that the legal action could lead intermediaries to halt XRP transactions due to the associated legal risks, causing a reduction in XRP’s liquidity and declining its value, resulting in significant losses for third-party holders.
Grundfest also questioned the SEC’s inconsistency in treating Ethereum (ETH) and XRP, asserting that there were no substantial differences in their operations concerning federal securities laws. He believed this differential treatment created an unfair competitive imbalance in enforcing federal securities laws.
However, these revelations not only add complexity to the Ripple-SEC lawsuit but also raise important questions about the regulatory approach to various cryptocurrencies. It highlights concerns within the crypto community about the SEC’s actions and the need for clarity and consistency in its approach to digital assets.
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