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Ripple Defence


Julian_Williams
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9 minutes ago, Pablo said:

Is there a reason why you think this might be relevant? I'm wondering if it will be easier and more relevant to read the Kik judgement?

In Kik, Justice Hellerstein summarised the relevant case law and also provided his logic as to how it extended to the Telegram ICO for each limb of Howey. It's the first time any Judge in the US has gone into depth on the issue and Hellerstein is no lightweight so it has important precedential value.

In fact, if people haven't read Kik and Telegram, I don't see how they can comment on the current matter against Ripple. This case is being brought before the same courts in New York that heard both Telegram and Kik. And it's even possible it will be heard by one of the same justices.

Hi @Pablo, thank you for all your insight. Since your responses are scattered across the forum, I’ll just use this topic to highlight Kik//Kin case, since you also mention it in your post. I know you pointed out that Kin was never declared NOT a security, but what do you think of the final settlement on October 22nd between Kik and SEC, would that not be a preferable outcome for Ripple as well, or is their case too different?

 

Kik statement after settlement (text bolding is my own - https://medium.com/kinblog/a-new-chapter-begins-in-the-life-of-kin-and-the-kin-foundation-ddd26cb7ff50):

“Concurrently, the future of the Kin Foundation is not adversely affected. The SEC has not asked to register Kin as a security, and didn’t impose trading restrictions on it. Prior to this settlement there had been questions from exchanges if they could list Kin which hindered Kin’s ability to get on top tier exchanges. The judge’s ruling in the case and the terms of the settlement make it clear that the Kin cryptocurrency is not in violation of any securities law and should be free to trade on exchanges.”

 

Official settlement document: https://www.courtlistener.com/recap/gov.uscourts.nysd.516941/gov.uscourts.nysd.516941.90.0.pdf

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Hi everyone. I would like to ask @Pablo some questions cause I know he is an expert on this here.

 

The differences I see in regard to Kik case. Kik had an ICO after SEC 2017 DAO report and at that time no ecosystem yet built.

In the SEC-Ripple lawsuit, as I understand and please know I am no lawyer, the main focus is on Ripple's sales of Xrp being an investment contract. They, SEC, say from at least year 2013....can they go as far back? I mean before the SEC DAO report in 2017? Or it can only apply from 2017 till today?

Do you think if it comes to time frame 2017 till now it will be harder to justify Ripple sales of xrp with howey test (developed ecosystem and customers talking about its use case - faster and cheaper cross-border transactions)? 

Am I understanding it correctly?

Edited by Twinme
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1 hour ago, QWE said:

I know you pointed out that Kin was never declared NOT a security, but what do you think of the final settlement on October 22nd between Kik and SEC, would that not be a preferable outcome for Ripple as well, or is their case too different?

Maybe I've misunderstood but Kin, the tokens were conclusively declared an unregistered security by the court:

Quote

Thus, I hold that the Pre-Sale, and the TDE sale to the general public, constituted an unregistered offering of securities that did not qualify for exemption under Rule 506(c)

It doesn't get clearer than that.

The Kik settlement certainly has some curious language in it which often happens in negotiated documents with different authors. I've read the Kin announcement but it doesn't seem to reflect what the court ordered or even what the settlement described. It is peculiar wording for sure but with the 45 days' prior notice requirement, the SEC could simply injunct Kik every time they attempted to sell Kin without the appropriate registrations in place as required in paragraphs (a), (b) and (c) of the settlement.

The Ripple case is a bit different because XRP is being used for a specific purpose in ODL corridors and having XRP viewed as a security creates additional cost and tax implications for money makers and financial institutions using it as a bridge currency. In the case of Kin, the tokens are mainly used by individuals within the Kik ecosystem and for speculative trade.

Ripple is also playing in a different sandpit with a more sophisticated client. I can't imagine a bank or remittance company looking at the Orders and agreeing with Kik that:

Quote

"The judge’s ruling in the case and the terms of the settlement make it clear that the Kin cryptocurrency is not in violation of any securities law and should be free to trade on exchanges."

As I said - Kin's announcement is very curious. If Kik is so sure about Kin's designation, why say "should be", not "is"? That leaves the exchanges exposed to litigation by the SEC and Kik would probably say "your problem, not ours". Banks and remittance companies will be more scrupulous and risk averse.

I think I've mentioned elsewhere that the SEC has not requested confiscation of Ripple's holdings of XRP. Just how Ripple would sell their XRP if they reach a Kik-type settlement is an important question and may be the reason Ripple couldn't reach agreement with the SEC.

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22 hours ago, RikkiTikki_is_Back said:

Short for not having a life especially if you find XRPChat entertaining.  I know the pandemic has been rough but man If I took time out to troll all things I don't like or think little of on a regular basis I would be questioning my own sanity "I don't have the energy or the time, but to each it's own."

I have adopted 5 kids, trust me, my life is full.  Sounds like you are a bit jealous that I made the right choice and made a good profit and you are probably still wishful thinking. 

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1 hour ago, dontsellmeadog said:

I have adopted 5 kids, trust me, my life is full.  Sounds like you are a bit jealous that I made the right choice and made a good profit and you are probably still wishful thinking. 

Not a all but you just made a statement that really makes me wonder if you have a life, 5 kids and your here trolling the Xrpchat forum??? I have 4 but their all adults and 2 dogs.  I have been off of here for damn near a year just recently getting back on.  Now I envy your idle time do tell us your secret???  What's the formula for having a full life with time enough to troll?? 

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Could we expect some help from politicians?? We all know and there is common awareness that the US lags behind in innovation and the Ripple case is one of the few Blockchain fintechs with a working solution although in a sort of start up, but promising and with potential.

Could there be pressure coming from the new administration, being aware that there's work to do and the US cannot permit to lose further terrain? Something like: "Hé guys, find a solution to solve this matter, and fast!"

I know lobbying was already mentioned, but is there any chance of fresh air coming in 2021? Frankly speaking, destroying billions of investments and putting at risk a company's world wide business is a very tough and perhaps disproportional measure, by the way with substantial doubts (and lacks) and there could be someone who's not happy with such an approach.

Edited by Frisia
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21 hours ago, Frisia said:

Could we expect some help from politicians?? We all know and there is common awareness that the US lags behind in innovation and the Ripple case is one of the few Blockchain fintechs with a working solution although in a sort of start up, but promising and with potential.

Could there be pressure coming from the new administration, being aware that there's work to do and the US cannot permit to lose further terrain? Something like: "Hé guys, find a solution to solve this matter, and fast!"

I know lobbying was already mentioned, but is there any chance of fresh air coming in 2021? Frankly speaking, destroying billions of investments and putting at risk a company's world wide business is a very tough and perhaps disproportional measure, by the way with substantial doubts (and lacks) and there could be someone who's not happy with such an approach.

Here is what I think. Its not that crypto came into existence yesterday or something like that. I'm sure that the US government quickly became aware of Satoshi's work. Now fast forward to where we are today. The lack of clarity and the absence of action from law makers clearly says it all. The Obama administration didn't offer clarity. The Trump administration didn't offer clarity. And here we got this pickle and the whole industry in the US is in a weird state of limbo. What exactly is allowed and not allowed? "Well - we cant tell you!"

Crypto challenges the US hegemony. Crypto is decentralized and this is something governments cant control. They don't want innovation in this industry, but rather they want to make everything more difficult. One example is the recent FINCen wallet rule. https://cointelegraph.com/news/heavy-hitters-of-crypto-call-for-users-to-comment-on-proposed-fincen-wallet-rule

The USD is a big Ponzi scheme with none-stop printing from the Federal Reserve and not to mention the enormous debt that will only get bigger.  People's hard worked money gets undermined daily and its not strange that people move some of their assets to crypto. Yes, crypto might be a bubble but at least you cant "print" more just like that.  This is new paradigm and in the end this is war that the US government will lose.

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I can understand when the SEC is after ICOs and here I am on the side of the SEC.

But XRP, BTC, and ETH have fully functional matured ledgers unlike ICOs. Incidentally, XRP is much older than ETH and, in contrast to the BTC "payment" ledger, has the higher-performance, more environmentally friendly and more cost-effective technology behind it.

All three use their respective ledger currency among other things as spam protection in the form of transaction fees in their distributed ledger networks.

If the SEC now decides to brand XRP as "digital asset security", it must do the same for BTC and ETH. Conversely, the SEC must also declare XRP as non-security if it has also done it for BTC and ETH. Anything else would be arbitrary.

The fact that the SEC now wants to make a difference is presumably due to inadequate research, a lack of understanding of the underlying technologies, lobbying by the mining companies and sheer greed for money.

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4 hours ago, JustKevStockholm said:

Here is what I think. Its not that crypto came into existence yesterday or something like that. I'm sure that the US government quickly became aware of Satoshi's work. Now fast forward to where we are today. The lack of clarity and the absence of action from law makers clearly says it all. The Obama administration didn't offer clarity. The Trump administration didn't offer clarity. And here we got this pickle and the whole industry in the US is in a weird state of limbo. What exactly is allowed and not allowed? "Well - we cant tell you!"

Crypto challenges the US hegemony. Crypto is decentralized and this is something governments cant control. They don't want innovation in this industry, but rather they want to make everything more difficult. One example is the recent FINCen wallet rule. https://cointelegraph.com/news/heavy-hitters-of-crypto-call-for-users-to-comment-on-proposed-fincen-wallet-rule

The USD is a big Ponzi scheme with none-stop printing from the Federal Reserve and not to mention the enormous debt that will only get bigger.  People's hard worked money gets undermined daily and its not strange that people move some of their assets to crypto. Yes, crypto might be a bubble but at least you cant "print" more just like that.  This is new paradigm and in the end this is war that the US government will lose.

I am afraid the solution is very simple; if the US can't behave they need not join the party.  I guess Ripple have a special problem because they are a registered US company, but the XRPL is its own entity and will go on as before and prosper whatever SEC thinks.

I feel sorry for citizens of the US who feel locked out.  I hope you will find ways to join us because you are welcome.

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But aren't the Kin and Telegram cases not different than Ripple's case in the sense they wanted to raise money for a yet to be developed product and also been launched after the DAO-report? 

That's why Ripple says in its defence:

'Unlike prior ICO enforcement actions, this case will be the first time that the SEC has to refute years of trading data that fundamentally undermines its theory'

Also remarkable in Ripple's defence is:

'As a threshold matter, it would be unprecedented to bring a case against Ripple based on XRP sales that took place before the July 2017 DAO Report, especially in a case where the SEC is not alleging fraudulent conduct.'

I still think that Ripple's ongoing sales are placing xrp, especially after the DAO report (which is kind of clarity), under a possible perception of a security. 

So, why is ETH then seen differently? Because, my humble opinion, there is a non-profit foundation overlooking the ETH spend and the community is somehow involved in the decisions. The structure is more accessible. For comparison Coil got - what was it - 1 B xrp, Uniswap  around 100k or something. 

 

 

 

 

 

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Ripple sales are a problem yes. But I do believe SEC will have a harder time with Ripple then with Kik in court proving investment contract. Also 7 years of inaction doesn't sound very flattering.

Ripple now has a developed system and it was quite developed in 2017 (especially after april). Buyers are not buying xrp just for speculative purposes but for its use case. That is why I believe SEC is playing down their customer base, xrp use and the whole ecosystem (only 15 clients use xrp, no banks, sales to hedge funds with discounts for dumping on markets).

Btw I also believe CL and BG sales have very little to nothing to do with proving investment contract. But it did get me emotional for sure 🙂

They are trying to paint Ripple as ponzi scheme with corrupt leaders and no real use or demand for xrp. Like Pablo said, they are trying to tell a story. Time will tell what is true and what is not.

But I do remember the growth, Santander, SBI, first Swell, BG at Swiss national bank conference, why xrapid to ODL (no regulatory clarity), R3, Moneygram. I have been here since 2016 and I remember the need for xrp and believe it is still there. But that is just my opinion and my opinion doesn't matter.

Bigger picture: regulators are forcing courts to decide questions of vast economy and future development. Congress should be the one writing rules for crypto, regulators should only make sure individuals and companies obey by those rules. Lack of clear path for crypto and lack of rules is allowing regulators to play ping pong with future tehnnology and that will back fire on them in the long run. But then again, this is just my opinion.

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@Pablo - nice follow-up, which again opens some questions for me - if you would be kind enough to indulge

1 hour ago, Pablo said:

If that's how this plays out - it still leads to the conclusion that the asset (XRP) could remain free to be sold on the secondary market and used by clients but that Ripple, Brad and Chris (and potentially other founders) have to end their unregistered sales.

A SEC win would therefore no longer be a barrier to ODL adoption in the US - would you agree?

1 hour ago, Pablo said:

The escrow would remain in a bit of quandary although perhaps some form of structural separation - taking the escrow out of the hands of Ripple itself - might address that.

Can you elaborate further on what scenarios you see possible in terms of 'taking the escrow out of the hands of Ripple'? 

 

Finally, if XRP sales are determined to be a investment contract would this also extend to sales of XRP to entities outside the US? Or better yet, are there any realistic scenarios where Ripple loses the case to the SEC but is allowed to continue selling its escrow holdings AND still operate in the US?

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On 1/2/2021 at 4:24 PM, Twinme said:

Bigger picture: regulators are forcing courts to decide questions of vast economy and future development. Congress should be the one writing rules for crypto, regulators should only make sure individuals and companies obey by those rules. Lack of clear path for crypto and lack of rules is allowing regulators to play ping pong with future tehnnology and that will back fire on them in the long run. But then again, this is just my opinion.

Agree that this is what should be happening. However, even if Congress were to make the rules I would expect those rules would be tested in court. Anything as novel as crypto is going to end up in court eventually. It’s a pity it’s taken so long.  

Also, like you said in an earlier part of your post, sorting out the founders’ whale-sized bags has to be dealt with. The quantum under consideration is just too extreme. I get the risk/reward arguments. And ‘principle’ and ‘slippery slope’ and all that. But really, where are the risks to justify actual and potential multi billion dollar rewards? Like any human, a judge’s eyes will pop: ‘you’re getting how much for doing what?  Yeah. Nah. Not gonna happen’  

I suspect an interpretation will be crafted by the court to define XRP and Ripple’s relationship to justify stomping on certain people bags if it looks like they’re just taking the ****. Which, in my view, that’s what it feels like.

Course, like all of us here like to say, what would I know? I’m my case, nothing is the fact of it. 
 

 

Edited by Johno
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