The legal experts engage in a heated debate regarding Ripple’s XRP sales.
Recall that in December 2020, the United States SEC charged Ripple and two of its execs with selling unregistered securities in the form of XRP.
While the world continues to await a final verdict from the judge, which is expected to come at any time, top legal experts have reignited discussion surrounding Ripple’s initial XRP sales, which saw the company raise $1.3 billion.
Yesterday, pro-XRP lawyer John Deaton engaged former SEC attorney Marc Fagel in a debate over the charges filed by the securities regulator.
Former SEC Lawyer Says the Regulator Has Better Argument
Fagel noted that based on his 30 years of experience as a lawyer for and against the SEC, the regulator is correct to allege that Ripple violated Section 5 of the Securities Act via its XRP sales.
He added that the SEC has a better summary judgment argument than Ripple. However, he stressed that he would not be surprised if the court rules in Ripple’s favor.
Deaton Thinks Otherwise
Reacting to the development, attorney Deaton agreed with Fagel that most altcoins violated section 5. However, Deaton has a problem with the way the SEC laid out its argument, which is capable of implicating secondary market transactions.
The pro-XRP lawyer noted that it was due to secondary market sales that he joined the SEC vs. LBRY lawsuit as amicus counsel to tech journalist Naomi Brockwell.
I wouldn’t argue against you on that point. I’ve stated that initial sales of most altcoins violated Section 5. My issue, as you know, has always been secondary sales. That’s why I became amicus in LBRY and the judge agreed with me that his order didn’t implicate secondary sales.
— John E Deaton (@JohnEDeaton1) May 4, 2023
In a follow-up tweet, Deaton shared excerpts of the amicus curiae brief he wrote on behalf of thousands of XRP holders.
According to Deaton, the SEC contends that “Ripple has engaged in the functional equivalent of a nine year-long, ongoing, 24/7 ICO, and that each and every sale of XRP, from anywhere in the world, was, is, always has been, and always will be a security.”
Notably, such an argument implicates secondary market sales of XRP. Deaton asserts that the SEC’s argument is far-fetched, traveling through space and time into the future and capturing all possible future sales.
This includes XRP sales conducted in countries where the crypto asset does not constitute a security, Deaton said.
“The SEC is not allowed to shortcut the Howey analysis by alleging each and every sale of XRP from the beginning of time until the end of the world, meets all three Howey prongs, and therefore, doesn’t have to offer specific transactional evidence,” he added.
Deaton asserts that while Fagel and other SEC lawyers can credibly argue that Ripple violated section 5 at some point, they cannot categorically state that the law backs the SEC’s argument in the Ripple or protects investors.
But they cannot credibly argue the SEC’s theory in the Ripple case, shown by citing the actual briefs by the SEC, is supported by the law or protects investors. I’ve said the SEC snatched defeat from the jaws of victory b/c of this absurd over broad theory.
— John E Deaton (@JohnEDeaton1) May 5, 2023
The development comes days after Australian-based lawyer Bill Morgan urged XRP holders to engage Fagel politely.
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