SEC v. Ripple: Jeremy Hogan shows how bad it can get for XRP

Rick Steves

“There has never been a crypto case in which this has happened. So, this would be unchartered waters but the effect of any order would be absolutely devastating.”

The SEC v. Ripple lawsuit is getting tense.

After several winning rounds for Ripple, the SEC is back putting pressure in the form of the motion to compel Ripple to hand over recordings that will support the agency’s case that XRP was marketed as a security.

While the dispute over the recordings continues and the Judge’s decision is still pending, attorney Jeremy Hogan went on Youtube to explore how Ripple can lose the lawsuit and what it means for XRP.

First off, Mr. Hogan pointed to two scenarios that can lead the SEC to victory.

The marketing scenario is like Telegram, which was at the time developing the blockchain project, GRAM. The SEC wants to lead the court to the conclusion that a reasonable purchaser of XRP would expect a profit from Ripple’s continued support of XRP.

The SEC has already found evidence that proves its case. One example provided by attorney Hogan is Ripple’s CTO David Schwartz comment in 2013: “As a corporation, we are legally obligated to maximize shareholder value. With our current business model, that means acting to increase the value and liquidity of XRP.”

“That is one path to victory for the SEC, but it is not the worst-case scenario because the marketing path does not focus on anything inherent to XRP itself, just how it was sold by Ripple.

“This first scenario would be limited to disgorgement damages and perhaps injunctive relief, but could it amount to a finding that XRP is inherently a security?“, the attorney asked.

A similar scenario would be Kin Interactive, which was sued by the SEC for the sale of unregistered securities. The court ordered a fine but didn’t contain a finding that the Kin token was a security.

The firm’s statement in October 2020, said that Kik is going to be OK. “Beyond the monetary fine, Kik’s assets are still Kik’s property, including its remaining treasury, its Kin reserves, and all of its intellectual capital. With this settlement, Kik is able to continue active development on the open-source Kin SDK and their new wallet app, Code”.

Jeremy Hogan raised two questions for the scenario in which Ripple loses the lawsuit.

– Can Ripple continue its business after paying the disgorgement judgment and without potentially being able to sell XRP, except to perhaps accredited investors?

– Will the exchanges feel confident enough to relist XRP?

The second scenario – which disputes the inherent nature of XRP – raises even harder questions. Attorney Jeremy Hogan called it the tidal wave scenario and it hinges on what is currently going on in the litigation with expert discovery.

“The bigger concern is based on the decentralization, or lack thereof, of the XRP ledger. The SEC hasn’t really focused on this argument, probably because it is a losing argument and it doesn’t really mesh with its theory of the case.

“But it is much more dangerous to you”, he continued, stating that the argument here is that XRP is centralized and so reliant on Ripple that makes it a security.

“There has never been a crypto case in which this has happened. So, this would be unchartered waters but the effect of any order would be absolutely devastating. Would have an instantaneous chilling effect on the markets, freezing liquidity, and leaving XRP holders holding the bag”.

 

The most searched Ripple and XRP stories this week: 

Ripple’s XRP on the spot: Crypto Mom’ points to SEC’s inability to articulate why an asset is a security

SEC v. Ripple: Recordings dispute “not looking good for Ripple”

Ripple’s nearly 30,000 questions could break the SEC’s number one claim

Ripple’s XRP stands to gain with crypto payments adoption at 45% by 2023

SEC v. Ripple: What’s next on the XRP lawsuit agenda?

Ripple running out of time as BIS ‘conspires’ to end cryptos’ threat to financial system

Ripple lawsuit raises hopes as ‘Crypto Mom’ condemns SEC policy

Ripple scores major win as Judge finds out if SEC lied to court

Ripple calls negligence as SEC seeks $1.38 billion from XRP lawsuit

Read this next

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.

Technology

Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.

Digital Assets

Thailand closer to launch digital asset exchange “to serve the needs of younger generations”

TDX is a subsidiary of the Stock Exchange of Thailand (SET) and its incorporation is part of the group’s strategic position to connect capital markets, open opportunities for the business sector in raising funds and cater to investment demand of new generations.

Digital Assets

Russia to legalize cryptocurrency payments as sanctions bite

Russia could soon be the latest country to lay down ground rules for legalizing cryptocurrencies as a means of payment, a sign that governments around the world are realizing that digital assets are here to stay.

Institutional FX

XTX Markets UK reports lackluster results for 2021

The UK business of XTX Markets, a non-bank FX liquidity provider and market maker, has reported its financials for the fiscal year ending December 31, 2021. The report showed impressive metrics after seeing revenues and customer activity increase even as the pandemic trading boom fizzled out.

<