However, Ripple Labs president Chris Larsen and Garlinghouse claimed the sales were legal. Their reasoning was based on the so-called Howey test of a U.S. court case, which determines whether an asset is a security. It`s been more than a year since the SEC stunned the tech world by suing Ripple, triggering crypto`s most-watched legal battle. The SEC argues that XRP is essentially an “illegal offering of securities” and that Ripple has not provided “the type of financial and management information” required by law. The agency said Garlinghouse, who was named in the lawsuit with co-founder Chris Larsen, had “repeatedly said that he has been XRP for a very long time, meaning he was in an important position that he believed would increase in value without disclosing his XRP sales.” Ripple`s legal team received the documents on October 20. Alderoty tweeted: “More than 18 months and 6 court orders later, we finally have the Hinman documents (internal SEC emails and drafts of his infamous 2018 speech). Although they remain confidential for now (at the SEC`s insistence), I can say that it was worth fighting for. Stu Alderoty, Ripple`s general counsel, told Capital.com: “The filings show that the SEC is acting outside its legal limits. The SEC is not trying to enforce the law — it is trying to reshape it in the hope that it can unduly expand its jurisdiction. The crypto legal expert adds a quote from court documents showing how Judge Netburn gave the SEC “atypical” comments to show her frustration with the regulator`s change in position. No matter what a former SEC official thought four years ago, the ultimate arbiter of whether cryptocurrencies are legal securities is the United States. The Supreme Court, which makes its decision independently of the agency, according to Stephen Diamond, a professor of securities law at Santa Clara Law School.
A crypto legal expert says that in the case of the U.S. Securities and Exchange Commission (SEC) v. Ripple Labs, the judge loses patience with the regulator for turning their story on its head. The filing of the complaint, late in the term of former SEC Chairman Jay Clayton, had a devastating effect on Ripple, leading to a drop in the market value of XRP in December 2020. Alderoty described the lawsuit as “an SEC carpet” that destroyed $15 billion worth of XRP coins “on the day the lawsuit was filed and hurt the very people the SEC is supposed to protect.” Joseph Hall and Jai Massari, partners at law firm David Polk, say the Howey test is obsolete and was never intended for assets such as cryptocurrencies. “Many tokens do not represent the ownership of a business and no claim to the income, income or assets of a commercial enterprise,” Hall and Massari write. The hypocrisy of arguing in court, on the one hand, that the speech is irrelevant to the market`s understanding of how the SEC will regulate cryptocurrency, and on the other hand, that Hinman sought and received legal advice from SEC lawyers when writing the speech suggests that the SEC is taking its litigation positions to achieve its desired goal. and not out of faithful fidelity to the law. The lengthy court battle has been frustrating for Ripple, who has accused the SEC of legal bullying and delaying tactics.
Alderoty suggested that Ripple had no choice but to accept the expanded schedule. Carol Van Cleef, who heads the digital asset legal practice in the Washington office of Bradley Law Firm, wants to know more. For crypto-skeptics and critics, including prominent figures such as Sen. Elizabeth Warren and a number of legal and financial experts, the Ripple lawsuit seeks to curb a rapidly spreading trend that could seriously undermine laws protecting investors and the financial system. Both parties have since filed motions to appeal the opposing party`s summary judgment. The legal teams reiterated their positions on whether XRP should be classified as a security. CEO Brad Garlinghouse has warned that regulators such as the SEC are holding back the US from crypto`s upside potential. “The SEC seems perfectly happy to let the U.S. fall further behind — all in the name of protecting its own jurisdiction at the expense of U.S. citizens,” he said in a tweet. Then SendTheBits, an XRP payment app, sent its amicus curiae request on October 21.
The motion states: “SpendTheBits` unique position may provide this court with meaningful and important information and context on the issues at issue in the case.” “What we`ve been saying since day one is that Ripple is defending this lawsuit not only on its own behalf, but on behalf of the entire crypto industry,” Alderoty said. The judge overturned the SEC`s appeal on Sept. 29, 2022, after the commission said it was protected by consultative process privilege. Brad Garlinghouse, President and CEO of Ripple Labs Inc., at the Milken Institute Global. [+] Conference in Beverly Hills, California, USA, Tuesday, October 19, 2021. The event brings together people with the capital, power and influence to change the world, connecting them with those whose expertise and creativity are reinventing health, finance, technology, philanthropy, industry and media.