Epic Pennant on BTC Chart

[jn_r]

Hmm.. So if a CEO or any other employee receives Stock as reward, is that conflict of interest? Because a stock is a security. And employees often get it, because it is another incentive to increase the value of the stock and hence the value of the company. Or is the difference that XRP is not a security? But then we don't even have a discussion..

[Sotong]

Wouldn't it be admission of guilt to pay a fine? Since the SEC doesn't collect fines for themselves but potential victims. And if so, wouldn't that establish that Ripple agrees XRP is a security? Sorry if stupid question, am not familiar with this. 

[Troote]

32 minutes ago, jn_r said:

Hmm.. So if a CEO or any other employee receives Stock as reward, is that conflict of interest? Because a stock is a security. And employees often get it, because it is another incentive to increase the value of the stock and hence the value of the company. Or is the difference that XRP is not a security? But then we don't even have a discussion..

The amount of information a company has to give regarding stocks is substantial. You know how much the leaders own, people with significant stake have to disclose their positions, they cannot trade freely due to insider knowledge,  they have to share all performance and financial information to all shareholders, etc. That is what makes it more OK. With XRP and the fact that Ripple is a private company, holders know absolutely nothing of what is going on.

[AlejoMoreno]

9 minutes ago, Troote said:

The amount of information a company has to give regarding stocks is substantial. You know how much the leaders own, people with significant stake have to disclose their positions, they cannot trade freely due to insider knowledge,  they have to share all performance and financial information to all shareholders, etc. That is what makes it more OK. With XRP and the fact that Ripple is a private company, holders know absolutely nothing of what is going on.

Also, from an outsider’s point of view. If Ripple and XRP are separate, and XRP is not a security, then it’s hard to understand why Ripple executives have so much XRP.

[jn_r]

8 minutes ago, Troote said:

The amount of information a company has to give regarding stocks is substantial. You know how much the leaders own, people with significant stake have to disclose their positions, they cannot trade freely due to insider knowledge,  they have to share all performance and financial information to all shareholders, etc. That is what makes it more OK. With XRP and the fact that Ripple is a private company, holders know absolutely nothing of what is going on.

yes I agree there is possibility of insider knowledge, they are still very influential the XRP eco system and hence on the price. That is one of the items in the Howey test, but does not make a complete Howey test. 

3 minutes ago, AlejoMoreno said:

Also, from an outsider’s point of view. If Ripple and XRP are separate, and XRP is not a security, then it’s hard to understand why Ripple executives have so much XRP.

So there are characteristics that make it resemble a security. I think if this is a question of openness and transparency to protect other investors, actions from -some- should be made as transparent as securities. In this case I'd think the founders and Ripple. Maybe they should come up with a new class of assets with other regulation, e.g. if total asset value > x and you own more than a certain percentage of total, then you are required to act on it as if it were security. Entities owning less then y would not be required to do so. In comparison, let's say you own 20% of the oil-market, then you can crash that market. Or if you own 10% of USD, then you can crash the dollar market..

[Julian_Williams]

48 minutes ago, jn_r said:

yes I agree there is possibility of insider knowledge, they are still very influential the XRP eco system and hence on the price. That is one of the items in the Howey test, but does not make a complete Howey test. 

So there are characteristics that make it resemble a security. I think if this is a question of openness and transparency to protect other investors, actions from -some- should be made as transparent as securities. In this case I'd think the founders and Ripple. Maybe they should come up with a new class of assets with other regulation, e.g. if total asset value > x and you own more than a certain percentage of total, then you are required to act on it as if it were security. Entities owning less then y would not be required to do so. In comparison, let's say you own 20% of the oil-market, then you can crash that market. Or if you own 10% of USD, then you can crash the dollar market..

Creating a currency is becoming so commonplace in the world of DeFi.  XRP is a currency not a security, but creating a currency need regulation like securities do.  SEC have resisted creating a new asset class, but it is obvious that it is needed. 

[Julian_Williams]

1 hour ago, Sotong said:

Wouldn't it be admission of guilt to pay a fine? Since the SEC doesn't collect fines for themselves but potential victims. And if so, wouldn't that establish that Ripple agrees XRP is a security? Sorry if stupid question, am not familiar with this. 

SEC have said that an ICO coin can start out as a security and then morph into a currency.  I think they would argue that whilst executives act in the egregious way Ripple do, then XRP remains a security.  If they stop, and put a proper distance between their company and the DA, then it becomes a currency.  So paying the fine and changing their ways would enable SEC to say XRP is NOW a currency.  This is why paying the fine, putting the XRP assets under stricter arms length control, would settle the issue and allow XRP to move on. 

I guess there are complex reasons Ripple do not want to do this.

Edited December 24, 2020 by Julian_Williams

[AlejoMoreno]

12 minutes ago, Julian_Williams said:

SEC have said that an ICO coin can start out as a security and then morph into a currency.  I think they would argue that whilst executives act in the egregious way Ripple do, then XRP remains a security.  If they stop, and put a proper distance between their company and the DA, then it becomes a currency.  So paying the fine and changing their ways would enable SEC to say XRP is NOW a currency.  This is why paying the fine, putting the XRP assets under stricter arms length control, would settle the issue and allow XRP to move on. 

I guess there are complex reasons Ripple do not want to do this.

I agree with this view.
 

I do think Ripple has tried to put some distance but they need to take it further.

They need to do a full disclosure regarding the founders and management XRP holdings and there needs to be some legal agreement about when and how those holdings can be sold.

Maybe there needs to be a rule where as long as Chris and Brad are working for Ripple, then they are not allowed to sell XRP due to conflict of interest. Then, if/when they depart the company, they need to get an agreement like Jed has.

[Gambaard]

3 hours ago, Julian_Williams said:

I know you are not.  To be honest I had not thought about it very deeply before this incident, although I was always unhappy with Jed's unloading of stock and did already think that any founder should not be selling.

My View:  Simply there is a conflict of interest in their roles are owners and managers of Ripple Labs which basically (although they changed the name of the founding company and gifted them to Ripple) created the tokens, and the purpose for which the tokens are sold to the public.  The tokens are sold to the market as token that have a purpose, and through that purpose they will (hopefully) gain in value.  The purpose being as tradable assets on software built by Ripple Labs (and now other companies working on the XRPL).  The money, which has been created out of the sales, should be used to benefit the purpose of the tokens.  

The money from the sale of XRP should be used to create the environment in which the sold tokens will gain value.  So it is perfectly in order for the money to be put into the coffers of Ripple Labs for the building of the software.  Ripple Labs, as beneficiaries of the money from the sale of the tokens on the public markets, should then provide an audit showing the use of the money.  They can buy the services of software engineers, and pay their managers a million a year, set up market makers as long as it is properly audited ad done for the benefit of the buyer of the tokens.  

What has happened is that Chris and Brad, who are already paid to do a job and look after the wellbeing of the tokens sold in good faith to the public, have a second interest which is to sell their tokens at the highest possible price and keep the income.  It is an absolute conflict of interest they they have this huge reserve fund of off the books XRP gifted to them which is then not sold for the benefit of the ecosystem they are developing, and is in fact creaming money out off the markets they are there to develop and protect. 

There is also the issue of insider trading.  They can see the bad news and off load before the price tanks, or onload before a big positive report is published.

I do not think Brad and Chris are heinous people.  Crypto grew up in an unorthodox environment, and they were doing the same as many others in that market.  Probably not thinking about the conflicts of interest very deeply.  I think they should not be fighting with SEC.  They were offered a fine which was a way out.  It is time some more rules were put in place about how ICOs are managed, so in many ways I find myself on SEC's side in this argument.

Just my point of view. 

Thanks Julian for this very elaborate answer. After reading everything twice, very carefully, I agree with you on most points. I don't know whether Brad and Chris sold their holdings at very market-specific moments, or that they sold x% every month like Jed. That distinction is very important to me. Also, Chris donated a massive chunk of his holdings to several good causes and funds (although I must confess I cannot find exact numbers).

[Julian_Williams]

3 minutes ago, AlejoMoreno said:

I agree with this view.
 

I do think Ripple has tried to put some distance but they need to take it further.

They need to do a full disclosure regarding the founders and management XRP holdings and there needs to be some legal agreement about when and how those holdings can be sold.

Maybe there needs to be a rule where as long as Chris and Brad are working for Ripple, then they are not allowed to sell XRP due to conflict of interest. Then, if/when they depart the company, they need to get an agreement like Jed has.

I think this way too.  I think it should be illegal in future for an ICO to award founders with tokens.   Maybe a founder can buy tokens, but then they should be put away and not touched whilst the company is being managed by the founders. It is common sense really.

[Julian_Williams]

1 minute ago, Gambaard said:

Thanks Julian for this very elaborate answer. After reading everything twice, very carefully, I agree with you on most points. I don't know whether Brad and Chris sold their holdings at very market-specific moments, or that they sold x% every month like Jed. That distinction is very important to me. Also, Chris donated a massive chunk of his holdings to several good causes and funds (although I must confess I cannot find exact numbers).

He gave 150 million to his old university.  But I am not sure he should have been allowed to do this.  My point of view is that he could arrange that his company, Ripple, make a donation in fiat, not XRP.  Maybe that fiat came from money raised by selling XRP to a Market maker.   It seems to me XRP should only be sold for money that is used for the benefit of the token's use and its ecosystem.  This could be interpreted quite widely, but the principle should always be there.  For instance SBI pay their ESports teams with XRP.  I find this is benefiting the XRP ecosystem because they are trying to establish XRP as a token that is used in ESports.  but giving away tokens to charities to then sell on the open market (instead of fiat money) is abusing the purpose of the tokens that they are supposed to be protecting.

Maybe my views are too rigid.

[Gambaard]

15 minutes ago, Julian_Williams said:

Maybe my views are too rigid.

Maybe they are, maybe they aren't. All I know is that I have often agreed with what you've written, so I wonder why we (somewhat) diverge in opinion on this subject. Keep writing man, I really appreciate it!

[Akovo]

Are you still holding @Julian_Williams? 

[Julian_Williams]

Just now, Akovo said:

Are you still holding @Julian_Williams? 

100%, I even made some on the way down.  Not saying I am wise, but I like the idea of being super rich, and this is the only chance I have got.

If I was 10 years younger it would be even easier because whilst I see this episode may have put us back, I do not think it changes much in terms of the long term goals fo project XRP.

[Akovo]

2 minutes ago, Julian_Williams said:

May have put us back,

Indeed, may or may not! We will get the clarity that we so much need. 

You are a great asset to this forum @Julian_Williams🙏