Brad Garlinghouse and Chris Larsen filing a motion to dismiss the case after revealing that SEC had given XRP it’s blessing to Exchanges back in 2019.
Since the news about the SEC’s lawsuit against Ripple became public, social media is abreast with fake news. Hence, many Ripple fans were eagerly waiting for the first hearing. The day of the pre-trial conference is finally here, for which many Ripple enthusiasts were eagerly waiting.
There were around 5200 people in attendance in the first Ripple vs SEC hearing, with some law students and professors attending as well.
Judge Torres, a Harvard graduate, presided over the Ripple vs SEC case, and both Ripple and SEC representatives had only a couple of minutes each to present their side. While defining digital assets, Judge Torres used both the SEC’s definition and the preferred definition of Ripple. In this article, we will provide the SEC Ripple lawsuit update.
SEC’s Side in the First Ripple vs SEC Hearing
Jorge G. Tenreiro, SEC’s litigation lawyer, presented the SEC in the first hearing. The SEC’s stance, in this case, was obvious from the beginning. They are focusing on the representations and expectations that were made back in 2013. It includes representations that Ripple made to the purchasers and expectations of the purchasers.
Overall, SEC’s attorney was adamant that XRP is a share of stock in Ripple and not a digital currency. Pointing to a statement made by Brad Garlinghouse of Ripple, SEC’s attorney quoted one of Brad’s past statements. The quote from the attorney was:
“Brad Garlinghouse said that he is long on XRP.”
The initial arguments from the SEC proved to be weak. They did not have the strongest proof to prove that XRP is security – An investment contract. Instead, the SEC was relying on the statements made by Ripple while marketing XRP. The SEC says that Ripple marketed XRP as a security.
Speaking on the first hearing of Ripple vs SEC case, the lawyer Jeremy Hogan in his YouTube video said:
“I was surprised that the lawyer did not mention the Kick Interactive case, and that case is a big problem for Ripple because it is a negative case authority from the same court.”
Expanding further, Jeremy said:
“Why wouldn’t they mention it at the first chance at an opening statement to the Judge – I don’t know.”
Ripple’s Side in the First Ripple vs SEC Hearing
Attorney Andrew Ceresney, former SEC Enforcement Director, is representing Ripple. Attorney Ceresney put out strong arguments in favor of Ripple. They took much more time to present their case compared to the SEC’s attorney.
The first argument made by Ripple’s attorney was that XRP is a decentralized digital asset that has been fully functional for eight years now. He said in the court that there was $66 billion worth of XRP transactions last month alone, and most of them did not involve Ripple at any point in the time.
Ripple’s attorney also noted in FINCEN in 2015 found that XRP is a digital currency. He also said that almost every other country in the developed world has reiterated that XRP is not a security. Instead, XRP functions just like Ethereum and Bitcoin, and the SEC has publicly stated that they are not securities.
Another point presented by Attorney Ceresney was that Ripple sold XRP as an asset. Expanding further, he noted that nowhere did Ripple say that they will promote XRP. Most of the sales of XRP have come from the secondary markets, and most purchasers of XRP did not have any contract with Ripple. Many did not even know that Ripple had anything to do with XRP.
One of the strongest arguments made by Ripple’s attorneys in the hearing was that the value of XRP is not influenced by Ripple’s business or profits. Instead, the price of Bitcoin and other cryptocurrencies has an influence on the value of XRP.
Ripple also raised the Telegram and Kick Interactive cases in their presentations. Praising Ripple’s defense in the first Ripple vs SEC hearing, the lawyer Jeremy Hogan in his YouTube video said:
“Ripple’s lawyer did a smart thing which was to address the bad case precedent. I might not understand the technical differences but Ripple argues that in the Kick Interactive and Telegram cases, there was more pooling of proceeds. In Ripple’s case, there was no pooling.”
A Surprise for the SEC
At the end of Ripple’s presentation, Ripple brought out some bombshell of information, which even surprised the SEC. Ripple’s attorney noted that as recently as 2019, the SEC was approached by a large crypto exchange. They asked the SEC if they can sell XRP on their exchange – Is XRP a security? Answering their question, the SEC did not tell them not to sell XRP. It proved to be a masterstroke by Ripple in the first hearing.
Attorneys of Ripple also made it clear that both Brad Garlinghouse and Chris Larsen will be filing a motion to dismiss the lawsuit against them.
The SEC was taken by surprise when Ripple’s attorney raised the 2019 incident of a large cryptocurrency exchange reaching out to the SEC for clarity on XRP.
The SEC was taken by surprise when Ripple’s attorney raised the 2019 incident of a large cryptocurrency exchange reaching out to the SEC for clarity on XRP
There are likely to be discovery disputes with regards to the information presented by Ripple near the end of the first hearing about a large crypto exchange reaching out to the SEC in 2019. Ripple will try to uncover more of the information, and the SEC will try to hide it as much as possible. So far, it is obvious from the hearing that Ripple has the upper edge against the SEC in this case.
Overall, Ripple is focusing on what has happened recently. On the other hand, the SEC is focusing on what has happened in the past.
Who do you think has the upper edge in the case – Ripple or the SEC? Let us know below in the comments. Please also let us know what you think about this SEC Ripple lawsuit update by Hashant.