Ripple Wins SEC Suit

SEC lawyers learned ‘nothing’ from Ripple case


While the cryptocurrency industry is waiting for the final outcome of the protracted court battle between Ripple and the United States Securities and Exchange Commission (SEC), legal expert and amicus curiae for the blockchain company John E. Deaton has criticized the regulator’s legal team.

Indeed, Deaton accused the SEC lawyers Jorge Tenreiro and the Enforcement Director Gurbir Grewal, currently involved in the lawsuit against crypto exchange Gemini, of learning nothing from the Ripple case in his post on X (formerly Twitter) shared on August 21.

Specifically, the expert was referring to Gemini’s reply in support of its motion to dismiss the SEC’s complaint, citing the decision by Judge Analisa Torres in the case against Ripple to remind of the established law, which argues that a Howey analysis applies to ‘the totality of circumstances surrounding the offers and sales of the underlying asset.’

According to the reply:

“The fact that the SEC cannot decide what is the security at issue only underscores the weakness of its position. It also violates fundamental fairness and the requirement of fair notice.”

Inconsistencies in SEC’s approach
As Deaton pointed out, Gemini meant to say that the SEC “makes up new arguments, disregarding any previous argument it made,” which “sums up the SEC and its approach to litigating crypto cases.” Furthermore, the lawyer argued that, as in the Ripple case, “the SEC is 100% transactional in its arguments, always shifting its theory or position.”

To drive his point home, he highlighted the SEC lawyers’ previous claim that the speech by former corporate finance division director Bill Hinman was “100% his own personal opinion and NOT guidance to the market,” to which Judge Sarah Netburn asked for the emails related to the speech.

According to Deaton, the agency then backtracked and said, “‘wait judge, he was Director of Corporation Finance at the time of the speech, in his official capacity as a Director and was giving the opinion and GUIDANCE of the Division of Corporation Finance,’” to which the Judge pointed out the inconsistencies.

Regarding Ripple
Furthermore, the expert recalled that the SEC had originally referred to Ripple as the common enterprise, later claiming “the common enterprise wasn’t Ripple after all, but it was the entire XRP ecosystem, including ALL XRP holders, all the exchanges selling XRP, and all the businesses and vendors using XRP, etc.”

After that, the SEC shifted its argument once more, no longer claiming that the entire XRP ecosystem was the common enterprise, but that “the XRP token ‘represents’ the common enterprise,” and later stating that it “never claimed XRP itself was a security because stripped down it’s only computer code.”

However, subsequently, it “argued that XRP ‘embodied’ Ripple’s promises AND ‘represents’ the investment contract AND ‘represents’ the common enterprise,” which Deaton called a “circular nonsensical argument” that suggests XRP is not a security, but only represents the second and third prong of Howey, which is “another way of saying XRP itself is a security.”

Finally, he stressed that “a federal judge called out the SEC’s ‘hypocrisy’ and stated its lawyers ‘lack faithful allegiance to the law’ and will say anything, no matter how inconsistent with previous positions or statements, in order to advance its litigation goals,” which he believes “doesn’t bother them because they literally think they are above the judge and the law.”

Meanwhile, the SEC has recently filed its motion to certify an interlocutory appeal in the case against Ripple after the blockchain company filed a preemptive opposition to the motion, asking Judge Torres to prevent the regulator from appealing due to a lack of a clear legal question.”

Keywords: finra lawyer, sec lawyer, securities lawyer, securities arbitration lawyer, new york securities lawyer, sec subpoena

Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.

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