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SEC Guidance Gives Ammo to Lawsuit Claiming XRP Is Unregistered Security

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14 hours ago, Panopticon said:

@Spekul8

You do not seem to comprehend how governments work. And all these are government control agencies. For example if it is for China's best interest to fully adopt and use XRP you think they are going to say "Yes but those US SEC guys are smarter than us, let''s blow up everything we built until now because they say in THEIR country XRP is a security"?

This is just not going to happen. All SEC will achieve is for US to be left behind in the crypto space.

You are missing the point. Please just for a second, try to open your mind and "comprehend" what I am saying.  

A country will not stop the use of a coin because of SEC, but if the SEC decides that XRP is a security, then first the US market makers will stop making markets for this coin in the USA. No Bid/No Ask, no price to buy, and no price to sell. All USA legal exchanges will delist it.  This drying up of liquidity will affect all markets worldwide and will send XRP to single cents or half a cent, and on top, the spreads on Bid/Ask will be astronomical because of this controversy.  
XRP could keep its intrinsic value, but you would not be able to realize it because you will not have an exchange that will give you a fair value for your XRP. 

 

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I have been in crypto since 2013 and bought XRP in late 2016 off Bitstamp and then I started shorting it on Poloniex. 

I am a lawyer and I represent a client which has authorization by a state tax commission to collect cannabis taxes using a digital asset  within a state which uses the more stringent risk capital test just like California, that is the state securities law standard being used  in the Ripple  class action.  

I had submitted a No Action request on behalf of my client  to the state securities department in early April and I did not think we would have an issue.  But not three days after the filing, the first "no action" request in the history of crypto was granted by the SEC.  The SEC FIN HUB announced the new standard in a memo. Not surprisingly, I had to strike and amend the filing and,  then I had to supplement that filing again and yet again. 

After the Libra announcement and the congressional hearings  and the Trump tweet, the position of regulators is even more stringent. They are refusing to allow asset backing with anything but USD and you have to peg to USD.  Volatility is forbidden and because Z Berg decided to become the Caesar  and create his own Dinars, we cannot peg to anything but USDs and use US banks to back with.  Under these rules, imagine what will happen to Tether.

The issue we did get a pass on with the state securities regulators  was the notion of how we raised capital to fund the operation. You cannot get a no action letter if you are selling a token and using the funds to capitalize the platform or operations which give value to the token or the platform.  We are raising money for the platform from a Reg D 506b private placement. 

 

Ripple funds its operations from the sale of tokens it controls.

 

I am positioning the tokenomics in such a way to begin litigation against this state securities department. These responses on behalf of my client are a total concession to the state's position.   If what I have experienced in my securities practice in this case  is any indicator, then it will be interesting to see what is next for Ripple and all the Ponzis out there.

 

I am attaching the latest position of the state securities department I received Friday and my clients compromised  response.  You can see how narrowly the regulators are construing this. Of course, this state had never had anyone ask to launch a token and they have been relying heavily on FIN HUB's expertise, which tell you something.. The use case and purpose for this stable, asset backed  utility token is for payment and tracking of cannabis to prevent financial crimes. We are using Ripple's ILP and many of the same bridging and business concepts, but we have had to modify them drastically to meet the SEC and state regulators requirements. 

 

 

The Applicants seek to modify and supplement their “Conditions” set forth in the June 5th, 2019 Amendment and would further concede and conform to any and all reasonable Department criteria for a determination of a no action position concerning all issues determined in the Department’s letter of August 9th, 2019, as follows: 

DEPARTMENT ISSUE ONE: The value of the Tokens is not fixed. 

APPLICANTS’ SUPPLEMENTAL CONDITION: RESERVE WILL FIX, PEG AND MAINTAIN THE VALUE OF ONE TRAK$>CREDITS TO ONE $USD, BY DEPOSITING AND MAINTAINING ANY PROCEEDS FROM THE SALE OF TRAK$>CREDITS WITHIN FEDERALLY INSURED BANKS OR OTHER DEPOSITORIES ACCEPTABLE TO THE OKLAHOMA DEPARTMENT OF SECURITIES, OKLAHOMA TAX COMMISSION AND OKLAHOMA BANKING DEPARTMENT.. 

DEPARTMENT ISSUE ONE A: It is disclosed that the value will never fall below $1 USD indicating that the value might exceed $1 USD. 

APPLICANTS’ SUPPLEMENTAL CONDITION: SEE ABOVE. 

DEPARTMENT ISSUE ONE B: The value of the Tokens will be backed by a wide array of unstable assets, e.g., fiat, precious metals, cryptocurrency, real estate, private equity, stocks and bonds, cannabis, smart contracts and “investments”. 

APPLICANTS’ SUPPLEMENTAL CONDITION: THE RESERVE WILL ONLY MAINTAIN ANY ASSET BACKING IN $USD WITHIN ACCOUNTS SUITABLE TO THE OTC, ODS AND OKLAHOMA BANKING DEPARTMENT AND WILL HAVE SUFFICIENT USD ASSETS ON DEPOSIT TO REDEEM ANY OUTSTANDING TRAK$>CREDITS. 

DEPARTMENT ISSUE TWO: There is a lack of emphasis that the Tokens will not be marketed to the public as investments. There does not appear to be a requirement that the purchasers confirm their intent that they are purchasing the Tokens for their own use and not as an investment. 

APPLICANTS’ SUPPLEMENTAL CONDITION: E-COUP L.C.A. WILL MAKE COMPLETE DISCLOSURE, EMPHASIZE AND OBTAIN WRITTEN AGREEMENT FROM CO-OP PATRONS THAT THE TRAK$>CREDITS WILL BE FOR THEIR OWN USE AND NOT TO BE USED FOR SPECULATION OR INVESTMENTS. 

DEPARTMENT ISSUE THREE: The representations regarding the Tokens reflect features generally associated with those of a security, e.g. equitable ownership and voting rights.) 

APPLICANTS’ SUPPLEMENTAL CONDITION: THE TRAK$>CREDITS WILL NOT BE USED IN A MANNER TO REFLECT FEATURES GENERALLY ASSOCIATED WITH THOSE OF SECURITIES NOR ALLOWED TO BE USED FOR VOTING RIGHTS OR EQUITABLE OWNERSHIP IN THE LIMITED COOPERATIVE ASSOCIATION. 

DEPARTMENT ISSUE FOUR: There is no mechanism, for example, an escrow account, for sustaining stable and sufficient funds to meet immediate and total redemption of the Tokens upon their consumptive use. 

APPLICANTS’ SUPPLEMENTAL CONDITION: THE RESERVE WILL ESTABLISH MECHANISMS, SUCH AS AN ESCROW ACCOUNT FOR OKLAHOMA PAY>TRACK LLC AND E-COUP L.C.A. PATRONS IN ORDER TO SUSTAIN STABLE AND SUFFICIENT FUNDS TO MEET THE IMMEDIATE AND TOTAL REDEMPTION OF THE TOKENS UPON THEIR CONSUMPTIVE USE. 

Edited by Sporticus
typos

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8 hours ago, Sporticus said:

Ripple funds its operations from the sale of tokens it controls.

You don't have access to their private books to say that with authority

Sales of XRP is only one source of funding for Ripple. Licensing their software suit is another, rounds of VC funding yet another

People always seem to forget that Ripple already has settlement with FinCEN, who have A-OKd the current channels of XRP sales and distribution that Ripple are following

 

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11 hours ago, Sporticus said:

I have been in crypto since 2013 and bought XRP in late 2016

I really wish I had too...  but alas,  was late to the game.

 

11 hours ago, Sporticus said:

I am a lawyer ...[Tinyaccount: cut the rest of the detailed post for brevity]...

Thank you for sharing all that.  Can I ask (as a fairly thick non-lawyer) what is the message you are conveying here?  

I think I can understand the gist of it,  but am unsure if you are merely sharing,  or have a cautionary message, or are saying Ripple has no issues regarding the SEC (I’m pretty sure you’re not saying that).  Can you give a short simplified message in plain words for us non-legal folk?

Thanks for your time.

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"Thank you for sharing all that.  Can I ask (as a fairly thick non-lawyer) what is the message you are conveying here?  

I think I can understand the gist of it,  but am unsure if you are merely sharing,  or have a cautionary message, or are saying Ripple has no issues regarding the SEC (I’m pretty sure you’re not saying that).  Can you give a short simplified message in plain words for us non-legal folk?

Thanks for your time."

 

i really do not have an opinion as much as I have questions and  I have disclosed to you the responses of what a securities regulator using the risk capital test  accepts as lawful and  what the thresholds for determining securities characterizations by a jurisdiction using the risk capital task seem to be in actual practice. 

 

I own a substantial amount of XRP and like many, I am concerned for the realities, not just the imaginings and loud voices.

 

But for those who think that the FIN CEN consent agreement Ripple entered into a few years back for ignoring the AML and KYC requirements that any prudent business handling money  should abide by; and those who think  that the FIN CEN consent  agreement , moots the issue of securities violations, Ha! Ha!. Ponzis and money laundries  are different legal issues entirely. One relates to  allowing your business to be a money laundry and the other is selling unregistered securities. Both are actionable separately.

If Ripple is using this money allegedly derived from the sale of  unregistered and nonexempt securities for anything at all, besides escrow and  backing the value of  XRP with USD and having enough to redeem all outstanding tokens, then that crosses the line according to the content of the state securities regulators I quote, this is derived from the April Hinman position. I am not giving an hypothetical here, those are quotes from regulators. This could be  a structural problem Ripple has, certainly it is at odds with the April SEC position. In order to pull off an unregistered and/or exempt offering, the bar is getting higher and higher, and this really cannot be corrected unless the entity were to completely reorganize and begin to back tokens with USD.

Who pays for this fancy web site we are on and why is it that legitimate criticism of Ripple is met with a howl of shrill shills who do not know sic'm from fetch'm?  Why does HODOR submit his XRP pieces to Ripple for review?   In the past when I used Twitter to criticize the relationship between Ripple and XRP, the great Joel Katz rushed in to control the reputation damage. 

These are all real issues and if you get outside the echo chamber of this sound booth into the world of the SEC, you can see the flaws.

The ideas that Ripple and Z Berg advocate which imply some disturbance or competition with the USD, are fraught with problems, just ask Qaddafi and Saddam what happens when you start conflicting with the USD.  

 

Anyway, I am wasting my time with this rant.

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@Sporticus

2 hours ago, Sporticus said:

 

 

i really do not have an opinion as much as I have questions and  I have disclosed to you the responses of what a securities regulator using the risk capital test  accepts as lawful and  what the thresholds for determining securities characterizations by a jurisdiction using the risk capital task seem to be in actual practice. 

 

 

 Thanks for sharing.

But would US government kill Facebook and Ripple? Will US give up the chances for innovation  just to protect US dollar from possible harms? 

I believe regulators also recognized the danger of being too conservative. If US becomes too restrictive, then all the money will be heading to Bitcoin in the time of crisis and this could be even more catastrophic event for US dollar. 

I have watched most of the public speeches from SEC and other government authorities related to regulating digital asset, and I concluded that regulators are still struggling to balance out the benefits and possible dangers of digital asset. 

What IMF said gives me an insight where they are heading.

“ Change is the only constant”

- from Winds of Change: The Case for New Digital Currency
By Christine Lagarde, IMF Managing Director Singapore Fintech Festival, November 14, 2018

 111418-md-sg-fintech-speech.ashx?la=en

 

 

 

Edited by quan

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