D-Day for SEC v. Ripple: Legal advice on whether XRP is a security unsealed
February 17 was yesterday: we have covered the news in two articles. Links below.
The SEC v. Ripple lawsuit has had two major updates yesterday.
Ripple revealed a piece of advice given by law firm Perkins Coie LLP as the defendants seek full disclosure of the legal memos “so that the public can review the SEC’s characterizations of those documents in their full context”.
The SEC explicitly said Hinman’s speech was public guidance as it tries to put those drafts and related notes back in the DPP box. This is a turn of events as for many months, the agency denied Ripple the opportunity to analyze the speech in its defense by claiming it was onlyl a personal opinion.
Two weeks ago, Judge Analisa Torres ordered Ripple to unseal documents pertaining to legal advice it received regarding the regulatory standing of XRP tokens.
The unsealing of those notes is scheduled for today, February 17, and they may help determine the outcome of the SEC v. Ripple lawsuit.
XRP utility won’t mean much if Ripple was advised to register with the SEC
Ripple’s fourth affirmative defense, which claims the SEC failed to provide fair notice that XRP could be considered a security according to the regulatory framework, could be in trouble if past legal advice pointed to near certainty that the SEC would come knocking at the door if the firm didn’t register with the agency and that the Howie Test and its four criteria were clear enough even for the digital asset.
The abovementioned legal advice was sought by Chris Larsen back in 2012. The law firm submitted two memos in which it had analyzed all the legal scenarios stemming from the issuance and sale of XRP.
Throughout the lawsuit, the SEC claimed Ripple and its executives were advised to treat XRP as a security but chose to proceed with the fundraiser, which began in 2013, “through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide”, as per the complaint.
The argument of utility would likely lose its strength if the court does find out that Ripple knew that XRP was a digital asset security, according to the legal advice it obtained in 2012.
Attorney Jeremy Hogan says SEC’s strategy is the right one
Attorney Jeremy Hogan, partner at Florida-based Hogan & Hogan law firm, was asked how he would play the SEC’s cards and he “agreed” with the strategy.
“They don’t have a bad strategy right now. They’re trying to frame it in the exact same way Judge Torres has seen before, making it really simple”, he said.
The plaintiff’s “simple” strategy consists of gathering all the evidence, going to the judge, and say “when these people bought XRP, the only use cases were something that Ripple had developed. So, they were looking at ripple to increase the value of XRP”, Hogan explained, adding that the SEC is also trying to downplay the fair notice defense.
“We’ve had the Howie test since 1934 with its clear four criteria. There’s no reason Ripple couldn’t have read these tests back in 2013”, Jeremy Hogan hypothetically argued on behalf of the SEC.
“We’re not required to go to every company and explain the laws. It’s impossible to do so”, he continued, adding that the SEC is keeping the section 5 violation simple. “They’re absolutely looking at Ripple for profit”.
“I don’t have to explain to them whether they are in violation of the law. I’m the regulator. I’m the police. if someone breaks the law, I arrest them and take them to jail. That’s gonna be the SEC position”.
Attorney Hogan said that will 100% be how they approach the case, although it is unknown how much evidence the plaintiff has to support its claims.
The next question would be if Ripple doesn’t win, then what will be the future of XRP?