Hearing in SEC Case Positive for Ripple, XRP, Says Lawyer
Attorney Jeremy Hogan says Ripple would be "feeling pretty good" with comments from the magistrate judge in the SEC's case against the firm and its executives.
A lawyer has described as "bombshells" comments made by the magistrate judge in the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and blockchain payments tech provider Ripple.
This matter is at the heart of the SEC's case against Ripple because the regulator claims XRP had been sold by the company and its executives without either being registered as a security or the firm seeking an exemption.
"No matter what the SEC may try and argue, a currency and a security are, by definition, in opposite ... These are two different things," Hogan said. He added the judge offering the view that XRP has utility is "exactly what Ripple wants the court to be thinking."
Netburn's comments came during a virtual hearing, observed by Hogan, over the SEC's attempt to obtain personal financial information from Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen.
The second "bombshell," said Hogan, came as Netburn questioned whether "everyone who sold XRP – including you and me – are selling illegal securities" based on the SEC's prior argument. The SEC attorney responded by saying that, under Section 4 of the Securities Act, only Ripple and its affiliates (meaning employees, Hogan said) could be accused of illegal sales.
This being the case, exchanges that have stopped selling XRP since the SEC action could now potentially relist it, according to Hogan, who stressed he wasn't offering legal advice.
However, Park Bramhall, senior counsel at Lowenstein Sandler LLP, takes a different view. "The fact that the SEC has apparently stated that parties other than Ripple and its affiliates can resell XRP under Section 4 of the Securities Act doesn't mean that exchanges are free to relist XRP," he said.
"What the SEC appears to be saying here is that, in its view, parties other than Ripple and its affiliates can rely on the exemption from registration provided under Section 4(a)(1) of the Securities Act for resales of XRP, and that exemption is only relevant if XRP is deemed to be a security," he told CoinDesk.
Netburn is not the primary judge in the case but she is assisting District Judge Analisa Torres with aspects of the case such as discovery and mediation.
"If I'm Ripple, I'm feeling pretty good that my mediator and consulting summary judgment judge just said on the record what I essentially argued in my pleadings," Hogen said.
There was no official court documentation on the hearing available at press time.
UPDATE (15:25 UTC, March 22 2021): Add comment from Park Bramhall.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.