A recent lawsuit filed by Empower Oversight, a non-profit government watchdog group, claims former Securities and Exchange Commission (SEC) officials were biased against Ripple Labs (CCC:XRP-USD) and its XRP crypto.
According to the lawsuit, they had conflicts of interest while declaring digital assets like XRP crypto as securities. At the same time they declared others like Ethereum (ETH) as non-securities, based on a conflict of interest.
As reported by the online magazine The Daily Hodl, Empower Oversight issued a press release on Dec. 10. It listed the highlights of their claims and requested a set of Freedom of Information Act (FOIA) documents about its conflicts of interest.
The Lawsuit Allegations Are Disturbing
The press release made the following claim about the conflict of interest, bordering on corruption:
“Former senior SEC official William Hinman received millions of dollars in compensation from his former employer, Simpson Thacher, while helping guide the SEC’s regulation of cryptocurrencies.“
The press release went on to say that other officials at the agency also had severe conflicts of interest. Additionally, it claims Marc Berger, leader of the SEC Enforcement Division who sued Ripple Labs, also left the SEC for the same law firm.
The SEC sued Ripple Labs in December of 2020 for allegedly issuing XRP as an unregistered security. The company has since claimed that the SEC does not have clear rules about which cryptos constitute a security and which don’t. Both Bitcoin and Ethereum have been designated as not being securities.
For example, the suit says former SEC chairman Jay Clayton may have had conflicts of interest. He declared Bitcoin was not a security, then joined cryptocurrency hedge fund One River Asset Management, which “only worked on Bitcoin and Ether.” Several other officials mentioned in the press release also ended up working for companies they were formerly regulating.
What This Could Mean for XRP
So far, the lawsuit does not state which exact rules may have been broken by the regulators if the allegations are true. But one thing is for sure — it does not look good for the agency. Moreover, if true, the SEC could be forced by a judge or public opinion to close the lawsuit against Ripple Labs.
If that happened, XRP could move substantially higher. One reason is that certain banks might be more inclined to use the crypto if it is less controversial. Ripple Labs wants them to use XRP and its other products for money transfers.
This has been one of the main criticisms of XRP so far — at least, in the U.S. However, Ripple Labs points out that its On-Demand Liquidity (ODL) products payment system has been used extensively overseas.
Its website says that “hundreds of financial institutions” use its RippleNet product to provide a better payment system. RippleNet connects users to these institutions around the world, aiming to make money transfers more efficient.
Ripple Labs now says that “ODL customers today can now access over 20 countries around the world for their payment needs.” It claims its international transactions in ODL have grown more than 25 times over the past year.
This new lawsuit will put more pressure on the SEC and perhaps even Congress concerning the regulation of cryptos. It may lead to a resolution of the existing lawsuit over whether XRP is a security or not. If this occurs, the crypto can seriously benefit as the controversy surrounding it ends.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.