Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 1 of 19
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`SECURITIES AND EXCHANGE COMMISSION,
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`v.
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`RIPPLE LABS, INC., BRADLEY GARLINGHOUSE,
`and CHRISTIAN A. LARSEN,
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`Plaintiff,
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` 20-cv-10832 (AT) (SN)
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`Defendants,
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`JORDAN DEATON, JAMES LAMONTE,
`TYLER LAMONTE, MYA LAMONTE,
`MITCHELL MCKENNA, KRISTIANA WARNER and
`ALL SIMILARLY SITUATED XRP HOLDERS,
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`Proposed
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`Intervenors.
`________________________________________________
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`PROPOSED INTERVENORS’ MEMORANDUM OF LAW IN REPLY
`TO PLAINTIFF’S OPPOSITION TO PROPOSED INTERVENORS’
`MOTION TO INTERVENE
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 2 of 19
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`TABLE OF CONTENTS
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`TABLE OF AUTHORITIES.......................................................................................................iii
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`PRELIMINARY STATEMENT..................................................................................................1
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`ARGUMENT..................................................................................................................................1
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`I.
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`XRP Holders Are Not Constitutionally or Statutorily Barred from Intervening...............1
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`II. XRP Holders’ Intervention Does Not Broaden the SEC’s Claims....................................2
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`III. The SEC is Attacking the Messenger Because It Can’t Attack the Message....................5
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`IV. XRP Holders Meet the Standard to Intervene as of Right.................................................7
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`a. XRP Holders Clearly Have a Cognizable Interest in This Case.....................................8
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`b. XRP Holders’ Interests Are Not Adequately Represented...........................................10
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`V.
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`Permissive Intervention Should Be Granted...................................................................12
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`a. Permitting XRP Holders to Intervene Does Not Sow Chaos into This Lawsuit...........13
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`b. Intervention Would Not Cause Any Undue Delay.......................................................14
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`c. Intervention Provides Necessary and Valuable Information........................................15
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`CONCLUSION............................................................................................................................15
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 3 of 19
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`TABLE OF AUTHORITIES
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`CASES
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` PAGE(S)
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`Butler, Fitzgerald & Potter v. Sequa Corp.,
`250 F.3d 171, 176 (2d Cir. 2001) .................................................................................10,11
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`SEC v. Credit Bancorp, Ltd.,
`194 F.R.D. 457 (S.D.N.Y. 2000).........................................................................................1
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`SEC v. First Jersey Securities, Inc.,
`843 F.2d 74 (2d Cir. 1988)...................................................................................................2
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`SEC v. Flight Transp. Corp.,
`699 F.2d 943 (1983).............................................................................................................8
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`SEC v. Founding Partners. Cap. Mgmt. Co.,
`2009 U.S. Dist. LEXIS 136825 No. 2:09-cv-229-FtM-29DNF (M.D. Fla., Aug 28,
`2009)................................................................................................................................2, 8
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`SEC v. Navin,
`166 F.R.D. 435 (N.D.Cal. 1995) .........................................................................................8
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`SEC v. Petro-Suisse Ltd.,
`2013 WL 5348595 (S.D.N.Y. 2013) ...................................................................................9
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`SEC v. TheStreet.com,
`273 F.3d 222 (2d Cir.2001)..................................................................................................2
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`State of New York, et al. v. Scalia, et al.,
`No. 1:20-cv-01689-GHW, Doc. 99, Jun. 29, 2020..............................................................2
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`U.S. Postal Service v. Brennan,
`579 F.2d 181, at 191-192 (1978).................................................................................13, 14
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`United States v. Hooker Chems. & Plastics Corp.,
`749 F.2d 968, 992 (2d Cir. 1984).......................................................................................15
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`Yang v. Kellner,
`2020 WL 2115412 at*1 (May 3, 2020) (Torres, A.) ..................................................13, 14
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`RULES
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`Fed. R. Civ. P. 24(a)....................................................................................................................6, 8
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`Fed. R. Civ. P. 24(b)……………………………………………………………………………..13
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`iii
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 4 of 19
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`Proposed Intervenors (“XRP Holders”) respectfully submit this memorandum of law in
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`reply to Plaintiff, Securities and Exchange Commission’s (“SEC”) opposition of Proposed
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`Intervenors’ Motion to Intervene.
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`PRELIMINARY STATEMENT
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`The SEC’s opposition to intervention is riddled with red herrings, personal attacks,
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`and irrelevant caselaw hoping to distract the Court from XRP Holders’ meritorious request for
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`intervention. XRP Holders are not constitutionally or statutorily barred from intervention. They
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`have a protectable interest that could be impeded, if not destroyed, by the disposition and
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`outcome of this case. Moreover, the existing parties do not adequately represent their interest.
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`XRP Holders should be allowed to speak for themselves. XRP Holders do not seek to broaden
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`the scope of the SEC’s claims but rather protect their interests and provide the Court with critical
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`information necessary for the fair disposition of this case. If intervention is granted, there will be
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`no delay in the proceedings or adjudication of this case. The SEC cannot claim, with credibility,
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`that it will suffer unfair prejudice from intervention. Considering the substantial public interest at
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`stake, intervention will provide this Court with a more complete picture of the issues presented
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`and contribute to a just and equitable adjudication of all claims and defenses.
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`ARGUMENT
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`I.
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`XRP Holders Are Not Constitutionally or Statutorily Barred from Intervening
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`The SEC’s assertion that XRP Holders are constitutionally and statutorily barred from
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`intervention is absurd. The Southern District, in SEC v. Credit Bancorp, Ltd., 194 F.R.D. 457
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`(S.D.N.Y. 2000), dismantled the Section 21(g) argument. The Court held “there is no persuasive
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`authority which suggests that section 21(g) ... bars intervention in all SEC enforcement
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`actions.” Id. at 466 (quoting SEC v. Prudential Sec. Inc., 171 F.R.D. 1, 4 (D.D.C. Mar. 26,
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 5 of 19
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`1997). Succinctly put, Section 21(g) of the Exchange Act does not bar intervention. See Mem. Of
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`Law in Supp. of Mot. to Intervene, ECF No. 123, at 12; and Def.s’ Resp. to Mot. to Intervene,
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`ECF 152, at 13.
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`Citing Heckler v. Chaney, 470 U.S. 821 (1985), a case completely irrelevant to
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`intervention, the SEC argues that intervention as a defendant in an SEC enforcement action is
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`constitutionally barred as it violates the prosecutorial discretion of the SEC. Pl.’s Memo. in Opp.
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`Of Mot. to Intervene, ECF 153, at 10-12. If the SEC were correct, intervention as a defendant,
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`pursuant to Fed. R. Civ. P. 24, would never be granted in governmental enforcement actions.
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`Yet, there are numerous authorities proving otherwise. See SEC v. Founding Partners Cap.
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`Mgmt. Co., 2009 U.S. Dist. LEXIS 136825 No. 2:09-cv-229-FtM-29DNF (M.D. Fla., Aug 28,
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`2009); State of New York, et al. v. Scalia, et al., No. 1:20-cv-01689-GHW, Doc. 99, Jun.29,
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`2020; SEC v. First Jersey Securities, Inc., 843 F.2d 74 (2d Cir. 1988); and SEC v. TheStreet.com,
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`273 F.3d 222 (2d Cir. 2001).
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`The SEC’s claim that XRP Holders are constitutionally and statutorily barred from
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`intervening as a defendant is simply without merit.
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`II.
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`XRP Holders’ Intervention Does Not Broaden the SEC’s Claims
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`The SEC asserts that XRP Holders are attempting to “broaden the scope of the SEC’s
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`claims by intervening in this action.” ECF 153, at 2. This is incorrect. XRP Holders’ motion to
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`intervene is completely within the scope of the Amended Complaint – the pleading that controls
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`the entire cause of action. Just as the SEC “has distanced itself from the Hinman speech, arguing
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`to Judge Netburn that it does not reflect the agency’s ‘official position’’’ (ECF 152, at
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`11) (citing Hr’g Tr. 50:13-16 (Apr. 6, 2021)), the SEC, faced with intervention, attempts to
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`distance itself from its own Complaint. The SEC writes: “[t]he Amended Complaint alleges that,
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 6 of 19
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`from 2013 to 2020, Defendants sold over 14.6 billion units of a digital asset called XRP.” ECF
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`153, at 3 (citing Am. Compl. ¶ 1, 6). But Paragraph 1, accurately reads, in pertinent part:
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`From at least 2013 through the present, Defendants sold over 14.6 billion units of a
`digital asset security called XRP. . .
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`Pl.’s Am. Compl., ECF 46, at ¶ 1 (emphasis added). In its opposition, the SEC intentionally
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`misstates the relevant time-period and omits the word “security” when describing XRP. It is both
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`telling and insightful that the SEC’s first paragraph of the Complaint describes the token itself as
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`a “digital asset security.” The Amended Complaint was filed on February 18, 2021, and it alleges
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`that today’s XRP is a security. Id. The SEC may attempt to evade that reality, but it is the actual
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`language and allegations contained within the Amended Complaint that governs this case, not the
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`transactional averments of counsel.
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`The reality is that the SEC has great difficulty reconciling what is alleged and what it can
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`prove. The Complaint asserts that all sales of XRP constitute violations because XRP itself is a
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`security. See Id. (“digital asset security”); Id. at page 40 (“XRP Was a Security Throughout
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`the Offering”); Id. at ¶ 231 (“At all relevant times during the Offering XRP was an investment
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`contract and therefore a security”); Id. at page 51 (“Purchasers of XRP Invested into a
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`Common Enterprise”); Id. at ¶ 290 (“Investors who purchased XRP in the Offering invested
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`into a common enterprise with other XRP purchasers, as well as with Ripple”); Id. at ¶ 291
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`(“Because XRP is fungible, the fortunes of XRP purchasers were and are tied to one another, and
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`each depend on the success of Ripple’s XRP Strategy”); Id. at ¶ 292 (“In other words, the price
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`of XRP rises and falls for XRP investors together and equally for all investors”); Id. at ¶ 293
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`(“The nature of XRP itself made it the common thread among Ripple, its management, and all
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`other XRP Holders”); Id. at page 62 (XRP’s Characteristics – as Constructed by Ripple –
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`Reasonably Fueled Purchasers’ Expectations of Profiting); Id. at ¶ 353 (“The very nature of
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`XRP in the market - as constructed and promoted by Ripple compels reasonable XRP purchasers
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`to view XRP as an investment”); Id. at ¶ 354 (“XRP is freely transferable or tradeable without
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`restrictions the moment it is purchased, and it was offered broadly and widely to all potential
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`purchasers, not just those who might be reasonably expected to “use” XRP”); Id. at page 63 (“No
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`Significant Non-Investment Use for XRP Exists”); Id. at ¶ 373 (“the money transmitters then
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`immediately resold those XRP into the public markets, to individuals and entities that had no
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`‘use’ for XRP”); Id. at ¶ 376 (“Defendants offered, sold, and distributed XRP to investors
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`worldwide, in any quantities and at various prices”); and Id. at ¶ 391 (“Even if some country
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`were to recognize XRP as fiat ‘currency’ at some point in the future, that would result from
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`Defendant’s significant entrepreneurial and managerial efforts to date (and likely in the future),
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`on which public investors expecting profit relied when making an investment of money into
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`Defendant’s common enterprise”).
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` Despite the above recitation of the actual language and descriptions contained within the
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`Amended Complaint, in its opposition, the SEC claims that whether XRP constitutes a security
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`per se, is not a question at issue in this case. See ECF No. 153, at 24. The Defendants also
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`recognize that the “SEC’s core theory is its contention that each unit of XRP is an ‘investment
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`contract’ and therefore a ‘security’ within the meaning of the Securities Act of 1933.” ECF No.
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`152, at 1; see also Def.’s Mem. of Law in Opp. of Mot. to Strike, ECF No. 171 at 12 (“The SEC
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`now contends that XRP itself is a security.”); Id. at 14 (“The premise of the SEC’s enforcement
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`action is that a unit of XRP is an investment contract.”).
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`Furthermore, on the critical issue of XRP secondary market sales, the SEC,
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`again, contradicts itself. On page four of its opposition, the SEC claims that the Amended
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`Complaint “does not allege that ordinary trading transactions by individuals in the secondary
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 8 of 19
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`markets violate Section 5...” ECF 153, at 4. Twenty pages later, the SEC admits “[t]he XRP
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`traded, even in the secondary market, is the embodiment of those facts, circumstances,
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`promises, and expectations, and today represents that investment contract.” Id. at 24 (emphasis
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`added). Quite frankly, the SEC cannot make up its mind on which theory it intends to pursue.
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`The SEC seems to be a prisoner, captured within its own position.1
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`It is the overly broad and far-reaching allegations contained in the Complaint that have
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`caused the interests of XRP Holders to become relevant and material in this enforcement action.
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`The SEC states that “this particular action does not charge transactions between individuals in
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`the secondary market as violations of Section 5.” Id. at 2. But it does not reject the premise that it
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`could charge violations in future actions. Thus, XRP Holders are not broadening the scope of this
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`case. Quite frankly, the scope of the Amended Complaint could not be broader.
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`III. The SEC is Attacking the Messenger Because It Can’t Attack the Message
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`“When You Resort to Attacking the Messenger and not the Message, You Have Lost the
`Debate.”
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`-Addison Whithecomb
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`Significant sections of the Amended Complaint are dedicated to portraying the role of
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`XRP Holders and their intent regarding the purchase or acquisition of XRP. See ECF at 50, ¶¶
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`282-293, page 62, ¶¶ 353=356. To support its litigation strategy, the SEC has promoted a false
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`narrative regarding XRP Holders. Faced with the possibility of that narrative no longer going
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`unchallenged, but unable to rebut the substance of XRP Holders’ claims, the SEC attempts to
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`1 The SEC’s tortured position was on full display at the March 19, 2021 hearing after Judge
`Netburn recognized the far-reaching global impact of the SEC’s theory and pondered:
`“Presumably under this theory then, every individual in the world who is selling XRP would be
`committing a Section 5 violation based on what you just said” Hr’g Tr. 44:7-9 (Mar. 19, 2021).
`Hence, XRP Holders, the Defendants and Judge Netburn have all concluded that the SEC’s
`primary theory in this case is that XRP itself constitutes an investment contract, and therefore, a
`security. The SEC is the only party or participant in this case to not acknowledge it.
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 9 of 19
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`inject a dark cloud over their counsel, hoping to dissuade the Court from granting intervention.
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`In an act of sad desperation and attempting to avoid the merits of intervention, the SEC tries to
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`divert the Court’s attention by deploying character assassination tactics in its opposition. Id. at
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`Fn. 2; at pages 6, 9-10. The SEC, recognizing that XRP Holders satisfy the requirements of Fed.
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`Rule Civ. P. 24(a), and knowing that XRP Holders can destroy the SEC’s false narrative about
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`them, avoid rebuking XRP Holders’ claims, and instead, attack their Attorney. Id. Considering
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`over 17,000 XRP Holders have contacted Attorney Deaton,2 social media (i.e. Twitter;
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`YouTube) serves as a means of mass communication.3
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`The SEC has attempted to portray XRP Holders’ counsel as an unhinged conspiracy
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`theorist crusader unfairly targeting the SEC. Id. Attorney Deaton’s criticism of the former
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`leadership of the SEC is mostly based on the media’s reporting regarding troubling discoveries
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`of conflicts of interests, self-dealings and personal gain regarding former Director of Corporation
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`and Finance William Hinman, who declared Ether as a non-security while being paid millions of
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`dollars while at the SEC from his law firm (a member of the Ethereum Alliance); and, former
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`Chairman Clayton, who declared Bitcoin and Ether as non-securities while directing a suit, in
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`essence, against its competitor, XRP, on his last at the SEC, later accepting a job at a hedge fund
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`that invested $1 billion in Bitcoin and Ether shortly before the lawsuit against Ripple and XRP.
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`See Deaton Decl. Ex. A Media Criticism of SEC Leadership.
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`2 At the time of filing the XRP Holders’ motion to intervene, 12,600 XRP Holders had contacted Attorney
`Deaton. Since that date, approximately forty-five hundred additional XRP Holders have contacted Attorney
`Deaton regarding the motion to intervene.
`3 For example, Attorney Deaton has used his Twitter platform to help minimize Court disruptions. Attorney
`Deaton has reminded and cautioned the public against making or releasing any recordings of Court
`proceedings; he has directed the public to never contact the Court or the parties or their attorneys; and, he has
`cautioned the public to not call into a hearing before the scheduled time. See Deaton Decl. Ex. B Deaton
`Tweets
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`Regardless of whether there was wrong-doing, XRP Holders became outraged. Attorney
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`Deaton explained that issues of sovereign and qualified immunity could result in the inability for
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`any party to depose the prior SEC leadership. After witnessing XRP Holders’ disappointment
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`and feelings of injustice, Attorney Deaton attempted to provide a satirical humorous exaggerated
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`mock cross examination of former Chairman Clayton, incorporating special effects and
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`humorous scenes from the iconic lawyer movie, My Cousin Vinny. Deaton Decl. Ex. C Satirical
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`Mock Cross-Examination. For the SEC to use the above scenario and imply or suggest that
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`Attorney Deaton was promoting violence or drug use is sad and pathetic. It is a clear attempt to
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`cast Attorney Deaton in the most unfavorable light, hoping that it will have a negative impact on
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`the motion to intervene. Attorney Deaton is a former Special Assistant United States Attorney,
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`Adjunct Law Professor, Mass Tort Product Liability Lawyer, and a medically retired Marine
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`Corps Judge Advocate who has been awarded significant military honors and medals, including
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`from the President of the United States. Attorney Deaton stands on his service and record to his
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`profession and to his country - not from being “popular on Twitter for his efforts”. See ECF 153,
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`at 6. The implication or suggestion that Attorney Deaton’s criticism of the SEC’s enforcement
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`action against XRP are unfair and unfounded, flies in the face of reality. See Deaton Decl. Ex. D
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`Media Criticism of SEC’s Enforcement Action.
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`IV. XRP Holders Meet the Standard to Intervene as of Right
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`Of the four factors considered for intervention as of right, the SEC has effectively conceded
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`the first and third factors. In its opposition, the SEC does not address timeliness or argue
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`that XRP Holders’ interest would not be impeded by the disposition of this case. Thus, the only
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`factors at issue related to intervention are whether XRP Holders have a cognizable interest
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`and whether that interest is adequately represented by the existing parties.
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 11 of 19
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`If the four factors delineated in Fed. R. Civ. P. 24(a) are all met, intervention must be granted
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`– including in SEC enforcement actions. See SEC v. Founding Parnters Cap. Mgmt., 2009 U.S.
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`Dist. LEXIS 136825 No. 2:09-cv-229-FtM-29DNF (M.D. Fla., Aug 28, 2009) (where the court
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`found that despite she and her husband being represented by the same law firm, the wife had an
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`interest in the frozen assets that was not adequately represented and granted the motion to
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`intervene); SEC v. Flight Transp. Corp., 699 F.2d 943 (1983) (where existing parties argued that
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`because the Defendant and the Movant had identical interests in the outcome of the litigation, her
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`interests were adequately represented but the court still granted intervention); SEC v. Navin, 166
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`F.R.D. 435 (N.D. Ca. 1995) (where the court granted intervention to Intervenor, on behalf of
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`herself and all others similarly situated pursuant to Fed. R. Civ. P. 24(a)).
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`a. XRP Holders Clearly Have a Cognizable Interest in This Case
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`The SEC dedicates an entire section of its Complaint alleging: “no significant, non-
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`investment use for XRP exists”. ECF No. 46, at 63. (capitalization and emphasis omitted); see
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`also Id. ¶¶ 358-378. Possibly the only issue the SEC has not contradicted itself, is related to the
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`incorrect claim that XRP has no utility. The SEC has even disputed the Magistrate’s comments
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`regarding the utility of XRP. At the March 19, 2021 hearing, Judge Netburn stated: “My
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`understanding of XRP is that not only does it have a sort of currency value, but it also has a
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`utility, and that utility distinguishes it, I think, from Bitcoin and Ether. Is that correct?” Hr’g Tr.
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`11:4-8 (Mar. 19, 2021). Counsel for the SEC responded: “Now the Court referenced utility for
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`XRP. We dispute whether that utility actually exists, your Honor. But the point is, even if it did
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`exist, Ripple and the Defendants’ efforts and their stated promised efforts to develop a use for
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`XRP is what makes it a security. That is the core of what makes something a security under the
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`Howey test and the cases that I have cited.” Hr’g Tr. 51:15-21 (Mar. 19, 2021) (emphasis added).
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`The SEC has remained steadfast in this erroneous lack of utility claim regarding the digital asset
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`XRP, including the XRP owned by XRP Holders. See ECF 153, at 25 (“though the SEC disputes
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`that XRP has any use”).
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`The utility of XRP is not only relevant as it relates to the application of the Howey
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`factors, but it is directly relevant to the issue of intervention. The SEC contends that
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`XRP Holders do not have “a ‘legally protectable’ interest in how the SEC enforces the federal
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`securities laws.” Id. at 17. The SEC misstates or confuses the cognizable
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`interest maintained by XRP Holders. The interest is in the underlying property (the token), not
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`the enforcement action. But even if the SEC’s faulty reasoning was accepted, there are thousands
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`of XRP Holders who have acquired XRP for consumptive use – not as an investment – and they
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`maintain an interest in that property (XRP) which is jeopardized by the disposition of this
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`case. In the motion to intervene, XRP Holders offered many examples of significant, non-
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`investment use cases for XRP, independent of the Defendants. ECF 123, at 16-22. Yet, in its
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`opposition, the SEC completely ignores these examples and mischaracterizes XRP Holders as
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`just secondary market investors attempting to inject “interest in issues collateral to this
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`enforcement action.” ECF 153 at 16. It mistakenly relies on SEC v. Petro-Suisse Ltd, 2013 WL
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`5348595 (S.D.N.Y. 2013), where a group of investors moved to intervene as plaintiffs objecting
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`to a consent decree and never clearly stated whether they invested in the 21 charged
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`offerings. ECF 153, at 16. Here, the SEC itself has asserted that purchasers of XRP “invested
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`into a common enterprise with other XRP purchasers, as well, as with Ripple.” ECF 46 at ¶
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`290. Additionally, the SEC asserts the property held by XRP Holders is a security because
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`the very “nature of XRP itself [makes] it the common thread among Ripple, its management
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`and all other XRP Holders.” Id. at ¶ 293 (emphasis added).
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 13 of 19
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`The SEC itself has made it clear that XRP Holders’ property interest is not collateral but
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`completely embedded in the eight-year continuous offering (including present day) alleged in
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`the Amended Complaint. In fact, the SEC has unwittingly conceded the cognizable interest of
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`XRP Holders when it stated: “The XRP traded, even in the secondary market, is the embodiment
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`of
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`those
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`facts, circumstances, promises, and expectations, and today represents that
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`investment contract.” ECF 153 at 24. XRP Holders and market participants should not be held
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`hostage because the SEC wants to have all prosecutorial options available to it. XRP Holders
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`submit that the admission by the SEC that it believes that the present day trading of XRP in the
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`secondary market “represents” investment contracts, requires intervention. At a minimum, it
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`certainly establishes a direct protectable interest that will be impaired or destroyed if the SEC is
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`successful in this action.
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`b. XRP Holders’ Interests Are Not Adequately Represented
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`The SEC argues that XRP Holders’ motion for intervention fails because their interests
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`are adequately represented based on the Second Circuit’s decision in Butler, Fitzgerald & Potter
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`v. Sequa Corp., 250 F.3d 171, 176 (2d Cir. 2001) where it required “a more rigorous showing of
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`inadequacy in cases where the putative intervenor and a named party have the same ultimate
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`objective[.]” In that circumstance, the proposed intervenor “must rebut the presumption of
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`adequate representation by the party already in the action.” Id. at 179-80. Clearly, XRP Holders
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`and the SEC do not have the same ultimate objective so there is no presumption of adequate
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`representation by the SEC. Furthermore, “[t]he SEC cannot represent [XRP Holders] while
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`making gross misstatements about them. Nor can the SEC represent [XRP Holders] or other
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`participants in the existing functioning XRP market while seeking to destroy that market and
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`frustrate the real purposes for which [XRP Holders] hold XRP” ECF 152 at 2.
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 14 of 19
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`The SEC effectively concedes the above and attempts to persuade this Court that because
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`XRP Holders share a common objective with the Defendants, their interest is already adequately
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`represented by the Defendants. ECF 153 at 18. The Defendants, however, have repeatedly
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`affirmed they do not and cannot adequately represent the interests of XRP Holders. ECF 152 at
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`2. Defendants have stated that “although Defendants’ and Movants positions somewhat overlap,
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`they differ in ways that give Movants and interest in being heard independently.” Id.
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`at 10. Defendants have made clear that their primary interest will be to defend “their historical
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`conduct, going back to 2013, . . . and should not face any penalty.” Id. On the other hand, XRP
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`Holders have not purchased XRP from Ripple and have zero interest in Ripple’s historical sales
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`of XRP. Ripple is correct, however, when it writes: “XRP Holders are interested in showing that
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`sales of XRP that do not involve Ripple are not sales of investment contracts.” Id. The SEC
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`argues that XRP Holders must “overcome the presumption of [adequate representation]” by
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`alleging, among other things, collusion, adversity of interest, nonfeasance,
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`or incompetence.” ECF 153 at 18.
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`Intervenors can easily show that Defendants do not adequately represent the interests of
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`XRP Holders by addressing just one of the non-exhaustive factors articulated in Butler:
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`incompetence. 250 F.3d at 179-80. Incompetent has been described or defined as “not having the
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`ability to do something as it should be done.” See Deaton Decl. Ex. E Definition. No matter how
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`intelligent, talented, and persuasive the Defendants’ lawyers are, it is impossible to represent at
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`all (let alone adequately) the interests of XRP Holders and the utility of XRP, if they are unaware
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`of those interests and that utility. Defendants concede that XRP Holders bring a perspective that
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`is “based on knowledge, experience, and activities separate from Defendants.” ECF 152
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`at 4. Defendants admit that they lack “the same information to support nor the same interest in
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`Case 1:20-cv-10832-AT-SN Document 186 Filed 05/17/21 Page 15 of 19
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`making that argument as do Movants.” Id. at 10. In fact, Ripple, in sworn interrogatories filed in
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`this case assert: “Ripple does not have knowledge of all current and potential ‘uses’ and
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`‘functions’ of XRP and such information is outside of Ripple’s possession custody or
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`control…” Def. Ripple Lab, Inc.’s Resp. to Pl.’s First Set of Interrogs., ECF 165-4,
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`at 7. Ironically, and as further evidence that Defendants do not adequately represent the interest
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`of XRP Holders, in answering the SEC’s interrogatories on the non-investment utility of
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`XRP, Ripple directs the SEC to the pre-motion letter filed by Attorney Deaton, counsel for XRP
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`Holders. Ripple instructs the SEC to “See Letter from John Deaton on behalf of XRP Holders to
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`Judge Analisa Torres re: Intention to file Motion to Intervene (Mar. 19, 2021) (D.E. 75) at 4
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`(Noting ‘literally hundreds of developers using XRP and the XRPL[, where] the vast majority
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`of these developers have never had any contact with Ripple or its executives’ among a list of
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`eight uses for XRP, ‘a few examples of how XRP Holders utilize XRP without Ripple’s
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`knowledge or input’).” Id. In short, in a decentralized network such as the XRP ecosystem,
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`Ripple is simply not in a position to explain how XRP has evolved and changed over time, and,
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`at the same time, defend sales as far back as 2013.
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`The SEC disputes the very existence of XRP’s utility, but claims it is “at the heart of this
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`enforcement action.” ECF 153 at 9. By placing the use of the very property owned by XRP
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`Holders at the “heart” of this litigation, the SEC itself has invited XRP Holders to that litigation.
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`It is clear, that Defendants lack the knowledge to adequately represent the interests of XRP
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`Holders and it is imperative that XRP Holders intervene to adequately protect their interests in
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`this case.
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`V.
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`Permissive Intervention Should Be Granted
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`This Honorable Court has confirmed that “[c]ourts in this district have consistently held that
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`Rule 24(b) ‘is to be liberally construed.’” Yang v. Kellner, 2020 WL 2115412 at *1 (May 3,
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`2020) (Torres, A.) (quoting Olin Corp. v. Lamorak Ins. Co., 325 F.R.D. 85, 87 (S.D.N.Y.
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`2018)). Despite the SEC’s erroneous contention that intervention is somehow barred in this case,
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`“permissive intervention is wholly discretionary with the trial court.” Id. In Yang, this Court
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`concluded that permissive intervention was merited because the intervenors had claims “that
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`share with the main action a common question of law or fact.” Id. (quoting Fed. R. Civ. P.
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`24(b)). This Court held that “[i]n light of the rights alleged to be at stake, the Court will permit
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`[intervenors] the opportunity to join in the litigation.” Id. The magnitude of the implications of
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`the SEC’s allegations related to the property of XRP Holders warrants the same rationale applied
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`in Yang.
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`Also, a major relevant factor for the Court’s consideration is “whether parties seeking
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`intervention will significantly contribute to full development of the underlying factual issues in
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`the suit and to the just and equitable adjudication of the legal questions presented.” U.S. Postal
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`Service v. Brennan, 579 F.2d 181, at 191-192 (1978) (Quoting Spangler v. Pasadena, City Board
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`of Education, 552 F.2d 1326, 1329 (9th Cir. 19770). The SEC alleged in the Complaint (