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Individual Defendants file letter and Peirce & Roisman statement as supporting Motions to Dismiss amid "significant regulatory uncertainty regarding when digital assets may be classified as securities by the SEC


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32 minutes ago, Pablo said:

It doesn't change my conclusions in the slightest because the open letter changes nothing about the legal status of XRP or have anything to do with the SEC case. It won't affect the judges in the slightest and if the case makes it to trial, the jury will be expected to ignore all public commentary.

You appear to have referred to the safe harbour proposal - but the question is about the effect of the SEC open letter in reference to the coinschedule settlement, where pearce and roisman state 'on the record' that there is no clarity provided by the SEC and leaves the question of which tokens are securities unanswered. This plays 100% into the hands of ripple's fair notice defense and I can't see how you would say what's quoted above. If it has no bearing at all on the case, then why did Ripple file it immediately as a brief to the judge in support of their dismissal of charges against Brad and Chris? 

Secondary question (to anyone) - this letter appear on the SEC website - could they have done this without the approval of Gensler?

 

 

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1 hour ago, Pablo said:

Commissioner Peirce's Safe Harbour proposal has been floating around for a very long time - over 2 years and counting - all she has done is reinforce the message with a public letter. She has been making repeated comments about the lack of clarity all the way back to 2017 so she has stayed on brand.

Meanwhile, Gary Gensler has been called in by Elizabeth Warren to set out a roadmap for regulation in the space. Great! But don't expect real progress for a while (as in many months). Then we have the FATF guidance going live this year too. Things are slowly turning but not necessarily in crypto's favor. That's the reason why UNI forked out $40m to builld a lobbying group in Washington to push for better regulations.

I provided input into the Commissioner's proposal as one of several crypto lawyers who was invited to comment so I have a detailed knowledge of the proposal. It won't apply to Ripple today and even if we could take a time machine back to 2013, Ripple would have failed the safe harbour requirements because it expects projects to be much more open about their business plan, tokenomics, lock-ups and decentralisation strategy.

The general view amongst most folks in the space is that regulation by prosecution hasn't worked. But that's a long way from saying that prosecutions aren't warranted. The SEC felt that prosecuting Ripple was so. And with Gary Gensler comfortably settled into his new role, I see no change in that view from the top people at the SEC.

I warned at the beginning of the year that Gensler would be unlikely to pull the rug under the case given what it would mean for SEC and the staff working this case. Commissioner Peirce's safe harbour doesn't change that at all.

Lots of folks completely mis-read the political environment too. I guess it doesn't help having so few true lefties in this space but if you really understand what the Democrats (and other left-leaning parties) represent, their platform and ambitions, the idea that they would offer Brad and Chris a free pass here is beyond preposterous. Remember, the investigation started in 2019, while Republicans were in control of WH and Senate. So this case now has bipartisan support.

It doesn't change my conclusions in the slightest because the open letter changes nothing about the legal status of XRP or have anything to do with the SEC case. It won't affect the judges in the slightest and if the case makes it to trial, the jury will be expected to ignore all public commentary.

What's your view on how this letter impacts Ripple’s fair notice defense? 

If market participants and companies currently do not have regulatory clarity on what is and is not a security, how could market participants and companies be accused of selling securities? 

How does someone break the law when they are asking for guidance from a regulatory agency but receive no clear guidance? 

The jury will be expected to ignore all public commentary, even when two SEC officials are basically agreeing with Ripple’s arguments that this industry has lacked clarity for participants? 

I'm stumped. 

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3 hours ago, Pablo said:

Commissioner Peirce's Safe Harbour proposal has been floating around for a very long time - over 2 years and counting - all she has done is reinforce the message with a public letter. She has been making repeated comments about the lack of clarity all the way back to 2017 so she has stayed on brand.

Meanwhile, Gary Gensler has been called in by Elizabeth Warren to set out a roadmap for regulation in the space. Great! But don't expect real progress for a while (as in many months). Then we have the FATF guidance going live this year too. Things are slowly turning but not necessarily in crypto's favor. That's the reason why UNI forked out $40m to builld a lobbying group in Washington to push for better regulations.

I provided input into the Commissioner's proposal as one of several crypto lawyers who was invited to comment so I have a detailed knowledge of the proposal. It won't apply to Ripple today and even if we could take a time machine back to 2013, Ripple would have failed the safe harbour requirements because it expects projects to be much more open about their business plan, tokenomics, lock-ups and decentralisation strategy.

The general view amongst most folks in the space is that regulation by prosecution hasn't worked. But that's a long way from saying that prosecutions aren't warranted. The SEC felt that prosecuting Ripple was so. And with Gary Gensler comfortably settled into his new role, I see no change in that view from the top people at the SEC.

I warned at the beginning of the year that Gensler would be unlikely to pull the rug under the case given what it would mean for SEC and the staff working this case. Commissioner Peirce's safe harbour doesn't change that at all.

Lots of folks completely mis-read the political environment too. I guess it doesn't help having so few true lefties in this space but if you really understand what the Democrats (and other left-leaning parties) represent, their platform and ambitions, the idea that they would offer Brad and Chris a free pass here is beyond preposterous. Remember, the investigation started in 2019, while Republicans were in control of WH and Senate. So this case now has bipartisan support.

It doesn't change my conclusions in the slightest because the open letter changes nothing about the legal status of XRP or have anything to do with the SEC case. It won't affect the judges in the slightest and if the case makes it to trial, the jury will be expected to ignore all public commentary.

A bit disappointed – this is about the Fair Notice point and you went for Here's Some Other Stuff I Know. 

We're interested in your opinion because you nailed the securities distinction here when the case started. But that was a legal distinction, not speculation about politics. 

Would still appreciate your opinion if you find the time. 

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5 hours ago, jbjnr said:

This plays 100% into the hands of ripple's fair notice defense and I can't see how you would say what's quoted above. If it has no bearing at all on the case, then why did Ripple file it immediately as a brief to the judge in support of their dismissal of charges against Brad and Chris? 

She's been a critic of the SEC approach to crypto prosecutions since her appointment in 2017.  The Commissioner first discussed the safe harbor proposal back in 2019 (or maybe even earlier). She published a full draft of the proposal for lawyers to comment in April. There is a mountain of material by her and from her about the gaping holes in the regulatory framework. She's been a strident critic of the SEC approach since her appointment (by Trump no less) in 2017.

Why didn't Ripple latch onto her earlier comments about regulatory uncertainty and the safe harbor draft back in April or from 2018, '19 or '20? Because it doesn't fit the defence narrative. Waving the letter around is pure theatrics. Maybe it works, maybe it doesn't.

Still, it's not without risk. Let's take a closer look, shall we?

I did chuckle at how Ripple's lawyers tip-toed around the safe harbour component of the Commissioner's letter. And they dodged the fact that the Commissioners very favourably name-checked the Crypto Rating Council (https://www.cryptoratingcouncil.com/asset-ratings) which gave XRP the worst rating of all the projects assessed by them. The CRC had effectively determined in August 2019 that XRP is almost certainly a security under US law. It's on their home page. The Commissioner would know this. So Ripple pushing that letter under the judge's nose is a very, very high stakes gamble.

What does it say about the Commissioner's real thoughts on Ripple if she name-checks the CRC? Did Ripple's lawyers even check the CRC website? I damn well hope so because that letter is a boomerang so let's see what they prepared if it comes up. I'm betting Tenreiro and Co will completely miss it. :sarcastic:

The idea the letter lends unique support to a fair notice defence is pretty close to fantasy. On top of everything I've already said, Ripple is claiming the fair notice defence for stuff that happened back in 2013-2020. The letter on the other hand is focused on the situation as it stands today.

Here's the other angle that has gone unremarked: Ripple is leaning on the fair notice defence pretty heavily. They only need that type of defence if they feel they may lose the investment contract argument. The defence assumes Ripple, Brad and Chris did breach the Securities Act. It's not their only defence obviously but I've been surprised at how little has been said about a supposed new rule that will re-write securities laws. That would have been fun and certainly mixed things up a bit.

The judges will also have a problem untangling the fair notice defence because it undermines Statute of Limitation rules that apply to everyone else. It's effectively saying: Ripple did a bad thing for so long and we said nothing about it and even watched them do it so hey, they're free to go. Yes, that would be novel legal territory I guess, but not one many people will get behind for obvious reasons. Just think about that defence in the context of other corporate malfeasance and you get a sense of the magnitude of the problem and why public policy weighs heavily against courts allowing the use of that type of defence.

Finally, if Ripple succeeds on fair notice, the industry is still stuffed because that defence adds nothing to anyone's understanding of the rules and still exposes Ripple to claims for future conduct, not to mention potentially check-mate them on the class action still rolling along on the West Coast. Ripple could even conceivably win on fair notice for past misconduct but be prohibited from future sales. That doesn't help anyone either.

Keep in mind that I'm only talking about Ripple, Brad and Chris here. XRP will be fine and maybe better than fine if Ripple has to close down. The community is so strong, I easily see a DAO popping up on Flare that allows holders and MMs to stake their XRP, leveraging the deep liquidity already in the market, pushing XRP into completely different sets of use cases that generate returns for holders of XRP rather than Ripple itself.

Imagine that. B)

Edited by Pablo
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2 hours ago, jcdenton said:

A bit disappointed – this is about the Fair Notice point and you went for Here's Some Other Stuff I Know.

Why should you be the only one to have some fun?

Seriously though, adjusting the political goggles is relevant in the context of fair notice because it has a significant public policy (read, political) consequences 

The current administration will be driving public policy outcomes that go directly to the heart of this case and crypto more broadly. NY being pretty much a blue state, you'd expect a large proportion of the justices and potential jurors will reflect that reality too.

So if I'm trying to read the bones here, it might be worth me adjusting my reading glasses slightly to the left. ;)

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5 hours ago, Pablo said:

Commissioner Peirce's Safe Harbour proposal has been floating around for a very long time - over 2 years and counting - all she has done is reinforce the message with a public letter. She has been making repeated comments about the lack of clarity all the way back to 2017 so she has stayed on brand.

Meanwhile, Gary Gensler has been called in by Elizabeth Warren to set out a roadmap for regulation in the space. Great! But don't expect real progress for a while (as in many months). Then we have the FATF guidance going live this year too. Things are slowly turning but not necessarily in crypto's favor. That's the reason why UNI forked out $40m to builld a lobbying group in Washington to push for better regulations.

I provided input into the Commissioner's proposal as one of several crypto lawyers who was invited to comment so I have a detailed knowledge of the proposal. It won't apply to Ripple today and even if we could take a time machine back to 2013, Ripple would have failed the safe harbour requirements because it expects projects to be much more open about their business plan, tokenomics, lock-ups and decentralisation strategy.

The general view amongst most folks in the space is that regulation by prosecution hasn't worked. But that's a long way from saying that prosecutions aren't warranted. The SEC felt that prosecuting Ripple was so. And with Gary Gensler comfortably settled into his new role, I see no change in that view from the top people at the SEC.

I warned at the beginning of the year that Gensler would be unlikely to pull the rug under the case given what it would mean for SEC and the staff working this case. Commissioner Peirce's safe harbour doesn't change that at all.

Lots of folks completely mis-read the political environment too. I guess it doesn't help having so few true lefties in this space but if you really understand what the Democrats (and other left-leaning parties) represent, their platform and ambitions, the idea that they would offer Brad and Chris a free pass here is beyond preposterous. Remember, the investigation started in 2019, while Republicans were in control of WH and Senate. So this case now has bipartisan support.

It doesn't change my conclusions in the slightest because the open letter changes nothing about the legal status of XRP or have anything to do with the SEC case. It won't affect the judges in the slightest and if the case makes it to trial, the jury will be expected to ignore all public commentary.

I can't stand your brutal honesty sometimes....LOL!!!

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2 hours ago, Pablo said:

The idea the letter lends unique support to a fair notice defence is pretty close to fantasy. On top of everything I've already said, Ripple is claiming the fair notice defence for stuff that happened back in 2013-2020. The letter on the other hand is focused on the situation as it stands today.

Finally, if Ripple succeeds on fair notice, the industry is still stuffed because that defence adds nothing to anyone's understanding of the rules

Wouldn't it support the fair notice defence because if the SEC can't provide clarity *today* on digital assets, how could they have provided it between 2013-2020? 

If Ripple lawyers succeed, doesn't that oblige the SEC to provide clarity today in some form? 

The former SEC Chairwoman is part of their defense team after all. 

But I feel that you're right. In the end, this will be good for XRP, whether Ripple is part of the ecosystem or not. Though, I highly doubt Ripple is going anywhere. 

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55 minutes ago, Pablo said:

The letter on the other hand is focused on the situation as it stands today.

Pablo, thank you for your posts.  I know that everyone looks forward to reading them, including me.  I would like to respectfully make a few responses to your recent post.  On the above quote, yes, the letter references the confusion in the marketplace regarding digital assets as it exists today.  But I think the inference here is that it's been confusing for market participants since the beginning; it's not like these commissioners IMO are suggesting that it was clear and unambiguous before, and now, today, it's confusing.

 

59 minutes ago, Pablo said:

Here's the other angle that has gone unremarked: Ripple is leaning on the fair notice defence pretty heavily. They only need that type of defence if they feel they may lose the investment contract argument. The defence assumes Ripple, Brad and Chris did breach the Securities Act.

As attorneys, we plead in the alternative.  The primary defenses are:  (1) xrp is not a security, but (2) even if it is defendants are not liable because no fair notice by the SEC was provided.  IMO there is no assumption at all that defendants are conceding that they breached the Securities Act by asserting their fair notice defense.  I think your point is that the only way we get to the fair notice defense is if the court first concludes that the xrp sales by Ripple violated the Securities Act.  However, one thing I am unsure about is whether it is possible for Ripple to raise the fair notice defense first with the court before the court addresses whether the xrp sales violated securities laws.  Something to the effect of "the court does not need to address whether the xrp sales violated the securities act because clearly there was no fair notice."  I don't know; it could very well be that it cannot be argued that way.  IMO, the fair notice defense is stronger than the defense relating to whether defendant's xrp sales violated the Securities Act.      

 

1 hour ago, Pablo said:

It's effectively saying: Ripple did a bad thing for so long and we said nothing about it and even watched them do it so hey, they're free to go. Yes, that would be novel legal territory I guess, but not one many people will get behind for obvious reasons. Just think about that defence in the context of other corporate malfeasance and you get a sense of the magnitude of the problem and why public policy weighs heavily against courts allowing the use of that type of defence.

I agree with this to some extent.  The reason that this case (and others digital asset cases relating to fair notice) is distinguishable from your analogy about corporate malfeasance, however, is because there was no clear guidance about what does and does not violate securities laws as it relates to sales of digital assets.  My recollection is that in the Upton case, that Ripple relies upon (which I skimmed a while ago), the court determined that Upton had not received fair notice of a securities violation because the SEC had known about the conduct violating the Securities Act (taking place at numerous companies), but didn't do anything about it until after they issued guidance about it.  Upton was not liable because all the transactions in question were pre-guidance transactions.

 

1 hour ago, Pablo said:

Ripple could even conceivably win on fair notice for past misconduct but be prohibited from future sales. That doesn't help anyone either.

IMO, I think it would actually help a lot (especially those in the xrp community) because it would mean that all xrps trading in the secondary market are not securities.  (Also, just because prior sales - such as in 2013-2014 - may have been investment contracts, future sales may not be because of the ubiquity and utility that now exists.  That was the basis for Hinman saying that early ether sales (ICO) may have violated the Securities Act, but subsequent sales did not (from what I recall)).   But even if future sales by Ripple are later deemed to be securities transactions, they would have to be registered.  They would not be prohibited - Ripple would register and sell to accredited investors who would have to hold it for a period of time.  A win on fair notice would allow xrp to be re-listed by exchanges, and banks and FIs would be free to use it without fear that those xrps are securities.  That has probably been one of the fears regarding xrp which has prevented its greater adoption for use as a bridge currency or otherwise.  I think (and hope) that would cause the price of xrp to rise dramatically.  That would help a lot of people on this site. ))

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3 hours ago, Pablo said:

The judges will also have a problem untangling the fair notice defence because it undermines Statute of Limitation rules that apply to everyone else. It's effectively saying: Ripple did a bad thing for so long and we said nothing about it and even watched them do it so hey, they're free to go. Yes, that would be novel legal territory I guess, but not one many people will get behind for obvious reasons. Just think about that defence in the context of other corporate malfeasance and you get a sense of the magnitude of the problem and why public policy weighs heavily against courts allowing the use of that type of defence.

Respectfully, bullshit! The primary job of the SEC is to protect us, the investor. What you say here completely ignores that context. Eight years of sitting on their asses having coffee with Ripple once a week, to discuss what, the weather? All the while they were arguably enabling our investing. The SEC has utterly failed from all angles. The judge will see through their bullsh!t and should check the SEC and their disdain for the people and companies they were obligated to represent. You're a smart guy, but I think you're wrong.

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Just now, VanGogh said:

Eight years of sitting on their asses having coffee with Ripple once a week, to discuss what, the weather?

The SEC and Ripple must know what they were discussing. Is this a secret?

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8 hours ago, Pablo said:

She's been a critic of the SEC approach to crypto prosecutions since her appointment in 2017.  The Commissioner first discussed the safe harbor proposal back in 2019 (or maybe even earlier). She published a full draft of the proposal for lawyers to comment in April. There is a mountain of material by her and from her about the gaping holes in the regulatory framework. She's been a strident critic of the SEC approach since her appointment (by Trump no less) in 2017.

Why didn't Ripple latch onto her earlier comments about regulatory uncertainty and the safe harbor draft back in April or from 2018, '19 or '20? Because it doesn't fit the defence narrative. Waving the letter around is pure theatrics. Maybe it works, maybe it doesn't.

Still, it's not without risk. Let's take a closer look, shall we?

I did chuckle at how Ripple's lawyers tip-toed around the safe harbour component of the Commissioner's letter. And they dodged the fact that the Commissioners very favourably name-checked the Crypto Rating Council (https://www.cryptoratingcouncil.com/asset-ratings) which gave XRP the worst rating of all the projects assessed by them. The CRC had effectively determined in August 2019 that XRP is almost certainly a security under US law. It's on their home page. The Commissioner would know this. So Ripple pushing that letter under the judge's nose is a very, very high stakes gamble.

What does it say about the Commissioner's real thoughts on Ripple if she name-checks the CRC? Did Ripple's lawyers even check the CRC website? I damn well hope so because that letter is a boomerang so let's see what they prepared if it comes up. I'm betting Tenreiro and Co will completely miss it. :sarcastic:

The idea the letter lends unique support to a fair notice defence is pretty close to fantasy. On top of everything I've already said, Ripple is claiming the fair notice defence for stuff that happened back in 2013-2020. The letter on the other hand is focused on the situation as it stands today.

Here's the other angle that has gone unremarked: Ripple is leaning on the fair notice defence pretty heavily. They only need that type of defence if they feel they may lose the investment contract argument. The defence assumes Ripple, Brad and Chris did breach the Securities Act. It's not their only defence obviously but I've been surprised at how little has been said about a supposed new rule that will re-write securities laws. That would have been fun and certainly mixed things up a bit.

The judges will also have a problem untangling the fair notice defence because it undermines Statute of Limitation rules that apply to everyone else. It's effectively saying: Ripple did a bad thing for so long and we said nothing about it and even watched them do it so hey, they're free to go. Yes, that would be novel legal territory I guess, but not one many people will get behind for obvious reasons. Just think about that defence in the context of other corporate malfeasance and you get a sense of the magnitude of the problem and why public policy weighs heavily against courts allowing the use of that type of defence.

Finally, if Ripple succeeds on fair notice, the industry is still stuffed because that defence adds nothing to anyone's understanding of the rules and still exposes Ripple to claims for future conduct, not to mention potentially check-mate them on the class action still rolling along on the West Coast. Ripple could even conceivably win on fair notice for past misconduct but be prohibited from future sales. That doesn't help anyone either.

Keep in mind that I'm only talking about Ripple, Brad and Chris here. XRP will be fine and maybe better than fine if Ripple has to close down. The community is so strong, I easily see a DAO popping up on Flare that allows holders and MMs to stake their XRP, leveraging the deep liquidity already in the market, pushing XRP into completely different sets of use cases that generate returns for holders of XRP rather than Ripple itself.

Imagine that. B)

Sorry Pablo but I think you lost the plot here initially with your first post in this topic where you said a lot without saying much at all and then this post where you rambled on about the Crypto Rating Council or how XRP will thrive if Ripple goes away. This is probably due to all the pressure put on you from all the ass kissing you get on this forum and treating your words as gospel by many members on this forum.

 The Crypto Rating Council is made up of exchanges and crypto funds each with their own agenda not neutral agnostic parties. Nowhere do they declare how the score is broken down or calculated and many of their score do not make sense like how ETH is given a 2.00  while HBAR a 3.75 when they both had a similar ICO fund raising. Plus they have never determined XRP to be a security as you claimed in your post as you can read in the section where they discuss their scoring system anything between 1 and 5 has the potential to be deemed a security but it is not.

Regardless they are not an official entity nor does their score carry any legal weight and if the SEC will start quoting score from CRC website then why not let Ripple quote my score of XRP in which I give it a 0 which represent it  not being a security.

image.thumb.png.9d6efb8beca80d8b50697425e4e157b0.png

 

 As for the part where XRP will thrive without Ripple now while that may be true in the long run the effects of Ripple going under will be devastating initially to the price and may take up to ten years to reach where we currently are if it is ever be able to recover.

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