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Ripple General Counsel commended former SEC Chairman Harvey Pitt for explaining the procedures of an enforcement action.
Following the demise of former SEC Chair Harvey Pitt, Ripple’s General Counsel Stuart Alderoty said the Silicon Valley-based blockchain company owes a debt of gratitude to Pitt for detailing the process of the commission’s enforcement action.
Remembering former SEC Chair Harvey Pitt today. Ripple owes a debt of gratitude to Harvey for explaining that once the SEC files an action, the “Court—not the Commission—decides whether the instrument in question is ultimately a security.”
RIP Harvey. pic.twitter.com/ORZINb5ZB6
— Stuart Alderoty (@s_alderoty) June 8, 2023
According to Alderoty, Pitt explained in the Tetragon vs. Ripple case that once the SEC files an action against an entity in a federal court, it is the court’s duty – not the commission – to determine whether the instrument in question constitutes a security.
“RIP Harvey,” Alderoty added.
Pitt’s Report on SEC’s Enforcement Action
Alderoty attached Pitt’s report on the lawsuit between Tetragon Fin. Grp. and Ripple. The outspoken Ripple’s general counsel highlighted Pitt’s comment regarding the process of an enforcement action involving the United States SEC.
Per Pitt, an enforcement action begins when the SEC files a lawsuit against an entity in a federal court. He noted that commissioners who vote to bring an enforcement action are minimally involved once the litigation commences.
Furthermore, Pitt explained that once the SEC files an action in the court, the commission’s role “pivots to that of advocate for its position,” adding that the court has the final decision on whether the instrument at issue is a security.
For context, Pitt, who served as SEC Chair under President George Bush, died in Washington on May 30, 2023. He died at the age of 78 after a sudden illness. Pitt assumed the position of SEC Chairperson in 2001 but lasted only 18 months at the commission. He resigned in 2002 following a series of corporate scandals, including the scandal involving energy giant Enron.
SEC Using Enforcement Actions to Class Cryptos as Securities
It bears mentioning that the SEC and Ripple have been engaged in a multi-year legal battle. The SEC alleges that Ripple sold XRP as an unregistered security. At the same time, the blockchain company noted that the asset should be considered a digital currency rather than a security.
Aside from XRP, the SEC has labeled other crypto assets as securities, including ADA, CHZ, SOL, AXS, FIL, ICP, FLOW, NEAR, MATIC, VGX, SAND, DASH, BNB, BUSD, ATOM, MANA, ALGO, and COTI.
The commission has faced significant criticism following its decision to label multiple crypto assets – software codes that run on blockchains – securities. Many have slammed the process at which the SEC determines which crypto assets fall under its regulatory purview.
SEC Chair Gary Gensler has previously claimed that most crypto assets other than Bitcoin are securities. However, the SEC boss did not explain how he arrived at that conclusion regarding the legal status of these “most” cryptos.
In a recent tweet, Alderoty said that irrespective of Gensler’s claims, the Securities and Exchange Commission does not have a magic wand to convert any token into a security.
Alderoty said the SEC’s allegations against Binance and Coinbase in the lawsuit remain unproven. He added that he looks forward to how Congress and the court will address these claims.