According to crypto lawyer John Deaton, a memorandum from the Securities and Exchange Commission (SEC) written five years ago but received very little attention implies that the agency had internal challenges in assessing whether or not XRP constituted security. The memorandum was prepared five years ago but has received very little notice.
This could be construed to suggest that Ripple, the company behind XRP, did not act legally irresponsibly when it launched the coin years ago, which is contrary to what the SEC has previously stated. This would be an interesting development.
The Memo from the SEC
According to Deaton, the "Howey memo" was written by SEC enforcement lawyers, and on June 13, 2018, it was given to Jay Clayton, the head of the SEC, and William Hinman, a commissioner. This happened just one day before Hinman's speech stated that Ethereum (ETH) might not be secure while omitting XRP from the conversation. Hinman's speech was given on the day before this event took place.
Clayton and Hinman met with Ripple's CEO Brad Garlinghouse and CTO David Schwartz three months later. The meeting took place three months after it first took place. Clayton and Hinman questioned why XRP wasn't mentioned in the prior speech while conversing about it. Immediately following the publication of the speech, Ethereum overtook Ripple to take the position of the second-largest cryptocurrency based on market capitalization. This was a position that ETH and XRP were competing for at the time.
"We have the actual meeting notes from Hinman's Special Counsel who was assigned to him by the SEC and attended the meeting," said Deaton. "The SEC assigned him a Special Counsel who attended the meeting." "He was provided with a Special Counsel by the SEC, who was present at the meeting." These [notes] written by this SEC attorney provide a LOT of information for us.
According to Deaton, the topic of the conversation was regarding the regulatory standing of XRP. While it was going on, Garlinghouse "exhibited frustration over the lack of regulatory clarity for XRP." According to Deaton, the purpose of the meeting was to discuss the regulatory standing of XRP. As a result of the SEC's failure to provide any definitive guidance on the matter, the situation has been described as "purgatory" by the company's CEO.
Analysis of XRP by the SEC
The attorney claims that Clayton's response was rather dismissive and that he urged Ripple to "keep talking to the staff" about the situation. He further stated that Clayton encouraged Ripple to "keep talking to the staff." From these pieces of information, Deaton was able to draw the conclusion that the Howey memo that the SEC had received a few months earlier could not have arrived at the conclusion that XRP was security because, if it had, Clayton would have brought it up during the meeting if he thought it was important enough to discuss.
"The memo was found to be privileged and not disclosed, so I haven't read exactly what it says," he said in a tweet early on Sunday morning. "The memo was found to be privileged and not disclosed." Nevertheless, the fact that no concurrent enforcement action was taken quickly after publishing the letter further indicates that the SEC had most likely not reached any determination at the time.
"If enforcement lawyers at the SEC struggled to conclude that XRP was a security in 2018, how can it be that Brad Garlinghouse and Chris Larsen were reckless in not knowing that XRP was being sold as a security in 2013-2015[?]" According to Deaton.
Judge Analisa Torres concluded in a judgement that she issued one month ago that sales of XRP by institutions were, in reality, transactions involving securities, whilst sales on secondary markets were not considered transactions involving securities. She continued by saying that XRP did not violate any securities regulations, which was her final point. The Securities and Exchange Commission (SEC) is investigating the potential of filing an appeal against the ruling. The SEC intends to argue that there is room for dispute over the matter in front of various courts.
0 Comments