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What if the SEC wins...?


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Let's project ourselves in a world where Ripple loses the lawsuits against the SEC and Tetragon. What would happen?

XRP is irremediably deemed a Digital Asset Security in the US. Ripple pays a hefty fine (not just a tap on the wrist) and becomes a SEC-reporting company like Apple or Amazon and the company/management teams need to transparently declare any sale of XRP and comply with security laws, just like Jeff Bezos when he sells Amazon shares. The Ripple use case for XRP's, ODL, fails completely in the US but continues its journey (or maybe not) in other countries around the world. Crypto exchanges completely and permanently delist XRP in the US.

But what else could happen?

Would Ripple just give up on XRP completely and re-focus their operations exclusively outside the cryptocurrency market, like Tierion did with TNT, leaving the future of XRP solely in the community's hands? Or are there other paths ahead?

Could XRP be removed from Coinmarketcap and find another life on the Nasdaq? Could XRP become some sort of shares in Ripple, giving people access to previously inaccessible financial information? Could XRP give access to voting rights and/or dividends from Ripple? Could XRP make its way into share/bonds ETFs (e.g. LS100 from Vanguard) rather than crypto-centric funds like Grayscale?

I am not suggesting these are plausible outcomes. I just would like to understand better the implications of the lawsuits.

What do our legal community members think? @Pablo @Eric123 

Edited by Troote
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I still remember troote joined slightly later than me, i was his lord and i also have a headstart of rep points. 

Now troote surpassed me in rep, and also got a Bronze, in such a short time, and most importantly he's my lord now, i give him full control of my big bag of xrp. 

Curious questions though, how can one get the bronze status? Is it when reaching a certain rep point? (1000 points?) 

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6 hours ago, Troote said:

I am not suggesting these are plausible outcomes.

They are in fact very plausible outcomes. That's not to say they're desirable. Ripple would need to become an SEC reporting entity and report sales of XRP to the market which would have to be sold on registered exchanges, not your average crypto exchange.

Even that might not be a problem because Coinbase is, in fact, in the process of applying as a registered exchange. They are doing that for bigger reasons than XRP obviously but there is no reason why, in a worst case scenario, Ripple couldn't sell XRP on Coinbase if Coinbase's licence comes through.

In this scenario, Ripple would also need to comply with all the other regulatory requirements such as reporting all material matters to the market. It would also govern sales by execs such as Brad and Chris. But maybe that's past due anyway. The only reason I can think why they haven't reported their personal sales to date is that they don't want to give the appearance that XRP is a security. Which is ironic because one of the SEC's main beefs is that Chris and Brad were selling into the market without any disclosure.

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24 minutes ago, Pablo said:

They are in fact very plausible outcomes. That's not to say they're desirable. Ripple would need to become an SEC reporting entity and report sales of XRP to the market which would have to be sold on registered exchanges, not your average crypto exchange.

Even that might not be a problem because Coinbase is, in fact, in the process of applying as a registered exchange. They are doing that for bigger reasons than XRP obviously but there is no reason why, in a worst case scenario, Ripple couldn't sell XRP on Coinbase if Coinbase's licence comes through.

In this scenario, Ripple would also need to comply with all the other regulatory requirements such as reporting all material matters to the market. It would also govern sales by execs such as Brad and Chris. But maybe that's past due anyway. The only reason I can think why they haven't reported their personal sales to date is that they don't want to give the appearance that XRP is a security. Which is ironic because one of the SEC's main beefs is that Chris and Brad were selling into the market without any disclosure.

Watching the Gensler videos it is clear he wants to find a way to allow innovation like ODL, but at the same time he wants to give strong support to his team that put the case together.

Is it possible for him to instruct his negotiators to put together a package for a transition phase from present way of selling XRP to new ways which would be more acceptable, with perhaps a fine for previous "misconduct" ?  Maybe the setting up of a separate independent organisation for handling the sales of the XRP to the market, with just some of the money from the sales reaching Ripple for accredited work for the XRPL etc?

I imagine that the price of XRP would double overnight, so even if Ripple were to get apportioned only half the income, it would still be enough to run the company post SEC.

Edited by Julian_Williams
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24 minutes ago, Muellhart said:

Do any of you expect anything substantial from the first pretrial meeting on February 22nd?

Good question! I’m expecting a bit of blustering, hoping for both sides to compromise at some point as it’s no clear cut win for either side, some humble pie needs to be had on both sides 

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46 minutes ago, Muellhart said:

Do any of you expect anything substantial from the first pretrial meeting on February 22nd?

From Ripple's side i'm not expecting anyting new. The usual arguments as to why XRP doesn't satisfy any of the prongs of the howey test.  How the sales were always only as a percentage of total volume, done with the Fincen license in hand. How Ripple got their Zerps ''gifted'' (lol).   

The SEC has the best cards in hand. Ripple's time is running out and money isn't infinite (with the warchest unusable).

 

Edited by Gepster
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39 minutes ago, Gepster said:

From Ripple's side i'm not expecting anyting new. The usual arguments as to why XRP doesn't satisfy any of the prongs of the howey test.  How the sales were always only as a percentage of total volume, done with the Fincen license in hand. How Ripple got their Zerps ''gifted'' (lol).   

The SEC has the best cards in hand. Ripple's time is running out and money isn't infinite (with the warchest unusable).

 

Calm down emotional dexter, sounds like you bought at 1 dollar

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36 minutes ago, Gepster said:

From Ripple's side i'm not expecting anyting new. The usual arguments as to why XRP doesn't satisfy any of the prongs of the howey test.  How the sales were always only as a percentage of total volume, done with the Fincen license in hand. How Ripple got their Zerps ''gifted'' (lol).   

The SEC has the best cards in hand. Ripple's time is running out and money isn't infinite (with the warchest unusable).

 

I really don't see SEC holding any cards for this one. Ripple is going in swinging and given the old SEC lead just yeeted himself (already a bit sus to me but presidential administrations and all that) and Gensler seems very quick in wanting to get some proper regs for crypto which only strengthens the case for XRP and other functional cryptos to be used. It's not looking particularly good for SEC if i'm honest but time will tell once the dust settles.

 

IF SEC wins, ripple burns 55% of all XRP which to the best of my knowledge means XRP goes up in value but maybe cripples da ripples plans for global implementation but this is purely speculative of course.

 

IF Ripple wins the SEC looks dumb and by-proxy Gary Gensler takes a hit even though he himself never fire the lawsuit out and XRP / Ripple continues doing what it does best and trying to spread XRP into FIs and maybe retail once enough FIs are sufficiently on board.

 

ALL speculation and guesswork as you can imagine.

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25 minutes ago, Hopium said:

Calm down emotional dexter, sounds like you bought at 1 dollar

Your trolling efforts are boring.  Apologies if my realism hurts your feelings. Now shoo.

 

24 minutes ago, Aphala said:

I really don't see SEC holding any cards for this one.

I don't think you've actually read the complaint. Heres a link of the complaint with notes: https://static1.squarespace.com/static/5ac136ed12b13f7c187bdf21/t/5fe2c21fb47c395086f89430/1608696357583/SEC+v+ripple+.pdf

Edited by Gepster
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2 hours ago, Pablo said:

They are in fact very plausible outcomes. That's not to say they're desirable. Ripple would need to become an SEC reporting entity and report sales of XRP to the market which would have to be sold on registered exchanges, not your average crypto exchange.

AFAIK this will only be the case for the XRP that Ripple and/or their execs sell. Not for any other XRP that's already circulating.

17 minutes ago, Aphala said:

IF SEC wins, ripple burns 55% of all XRP which to the best of my knowledge means XRP goes up in value but maybe cripples da ripples plans for global implementation but this is purely speculative of course.

To my understanding, SEC may not force Ripple to burn any of its assets (do they even have that legal right?)
IDNY about US laws but a measure the judge could take is the allowance for the SEC to confiscate those XRP that were unlawfully sold. What even might be the best outcome for Ripple (they have more XRP than cash). Then the SEC can sell those XRP themselves as unregistered securities, after all, as has been told, they already are running a validator :-) ..... but I'm afraid that the SEC prefers the penalties to be paid in cash ....

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Just now, kanaas said:

To my understanding, SEC may not force Ripple to burn any of its assets (do they even have that legal right?)
IDNY about US laws but a measure the judge could take is the allowance for the SEC to confiscate those XRP that were unlawfully sold. What even might be the best outcome for Ripple (they have more XRP than cash). Then the SEC can sell those XRP themselves as unregistered securities, after all, as has been told, they already are running a validator :-) ..... but I'm afraid that the SEC prefers the penalties to be paid in cash ....

Hmm food for thought though.

 

If SEC can sell them as unreg securities does that mean XRP overall would peak price wise? I assume they'd be cutting it off from the main flow of XRP that's currently around since that's already in circulation. I guess time will tell.

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2 hours ago, kanaas said:

To my understanding, SEC may not force Ripple to burn any of its assets (do they even have that legal right?)

This might be an academic argument because the SEC did not request confiscation or burning assets in the draft orders set out in the Complaint. I don't think the SEC would ever burn assets that could be sold so that investors can be compensated. What we don't know is whether Ripple has enough cash to provide sufficient disgorgement should they lose or settle. 

Here's a recent enforcement action against Shipchain from December that resulted in the SEC confiscating Shipchains' SHIP coins to a Fund Administrator to help compensate investors: https://www.sec.gov/litigation/admin/2020/33-10909.pdf 

The Tetragon lawsuit makes this question more interesting - if Tetragon win their case, that would result in most of Ripple's free cash being refunded. As I love to tell my C-Suite clients when faced with big decisions: "This is why we pay you the big bucks!" :) 

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