SEC v. Ripple: “Strange things” hint that settlement is in the works

Rick Steves

A number of strange things have caught the attention of attorney Jeremy Hogan, who now believes the deposition of William Hinman never took place.

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The Securities and Exchange Commission filed a complaint against Ripple Labs and individual defendants, Brad Garlinghouse and Chris Larsen, for the sale of unregistered securities, implicitly pointing to XRP as a security.

The industry reacted by delisting XRP from cryptocurrency exchanges in the United States and partnerships with Ripple soon crumbled, including MoneyGram – which is now apparently being approached by ex-Ripple co-founder Jed McCaleb and its new blockchain competitor, Stellar.

Talk of an almost inevitable settlement with the SEC soon emerged, with high-profile figures within the XRP community explaining how such a deal would look like.

In late June, and judging by the state of affairs, attorney Jeremy Hogan said he didn’t “see the case being decided at summary judgment until early 2022 – maybe January”.

As to a potential settlement, that “is likely to be after at least the close of fact discovery and that is now early September and even more likely to be after October 16.” – read the whole analysis here.

That overview might have changed dramatically after a series of “strange things” happening since June culminating in the silence from Ripple after the scheduled deposition of William Hinman on July 27 – which transcript cannot be accessed.

Attorney Jeremy Hogan suspects the sworn testimony never took place: “First, I don’t think the deposition of Director Hinman took place this last Monday. If it had, where is the transcript to be filed under seal for an in-camera review by the Judge and where is the motion to compel Hinman to answer certain questions?”

“Strange things” first occurred as the Judge granted the defendant’s motion in regard to discovery related to Bitcoin and Ether, which are relevant for the Howie test and the Fair Notice defense, but the SEC did not hand over the documents even despite risking monetary sanctions from the court.

In June 14, the agency “promised to substantially complete its production of the internal documents before July 2”, but on the court hearing of July 15, the Ripple counsel complained to the Judge the internal documents never arrived. Then, the Judge told the counsel to file a brief the next week, but Ripple never did.

Attorney Jeremy Hogan also noticed how the SEC was desperate for the deposition not to go forward and how quickly the SEC and Ripple reached an agreement regarding the terms of the testimony – “Really?  The Grand Canyon was crossed just like that? Hmmm…”

The cherry on top was the two SEC Commissioners’ public statement last week admitting to lack of clarity within the digital asset ecosystem.

“Something I’ve never seen in litigation before, 2 Commissioners of the SEC came out arguing, essentially, that Ripple’s Fair Notice Defense was valid – that market participants do not have Fair Notice in the crypto space.”

That public statement was added to Ripple Labs and the individual defendants’ motions on fair notice and to dismiss the case, respectively. The SEC responded to both letters, but only the individual defendants replied back to complete their record.

“Wow. Did Ripple blow it? Do Ripple’s 23 lawyers need more than 9 days to draft a 3-page reply brief?  Or… wait for it. Or is it possible or yes even likely that Ripple didn’t bother to file a response to the SEC  because IT DIDN”t NEED to. And Ripple didn’t need to file a reply because there were serious discussions regarding se…”

There could be hundreds of other explanations, but an upcoming settlement is his “best guess” unless something is filed by Friday.

SEC v. Ripple: New trial lawyer settles discussion over settlement

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