- Attorney John Deaton cited the Celsius case as an example, arguing XRP holders did not suffer financial losses like the lenders’ creditors.
- Deaton explains that the bankrupt crypto lender’s case makes it clear there is no horizontal commonality with the Ripple ruling under the existing law.
- Deaton assuages XRP holders’ concerns and explains that Judge Analisa Torres’ decision in the SEC vs Ripple case is sound.
Bankrupt crypto lender Celsius’ progress in bankruptcy court made the headlines last week as the firm finalized its strategy to repay creditors. Pro-XRP attorney John Deaton cited the Celsius bankruptcy case to explain that, unlike the bankrupt crypto lender’s case, XRP holders or traders did not lose their funds to Ripple, since many were unaware of the firm’s existence.
Deaton believes several XRP holders acquired the token for its relevance and high market capitalization when compared to other altcoins. This argument weakens the Securities and Exchange Commission's (SEC) narrative of “common enterprise” and secondary market sales of XRP tokens are unlikely to be considered as securities transactions.
Why Celsius bankruptcy does not share common ground with SEC vs Ripple lawsuit
Pro-XRP attorney John Deaton commented on the recent developments in the bankruptcy case of Celsius. The bankrupt crypto lender reached a settlement after year-long proceedings in the court.
Celsius now has two settlements that are likely to make it possible for the lender to begin reimbursing creditors 105% of their claims. To find out more about the lawsuit and the court ruling check this post.
The US financial regulator Securities and Exchange Commission (SEC) revealed its plans to appeal the ruling of Judge Analisa Torres in the SEC vs Ripple lawsuit in the Second Circuit. This increased the concerns among XRP holders and the community.
Deaton addressed both the concerns arising from the recent Celsius lawsuit and the SEC’s plan to appeal Judge Torres’ ruling in his tweet:
FIRST ME - NOW ⚖️— John E Deaton (@JohnEDeaton1) July 24, 2023
I’ve been fighting tribalism and echo chamber politics for the last three years. In 2013 SEC Officials were calling #Bitcoin a security. Unfortunately for me and my family, I wasn’t aware of #Bitcoin in 2013. Where was @maxkeiser when I needed him the most? https://t.co/GAKa4JV37S
Deaton explains that, unlike Celsius, XRP holders did not lose their funds to payment remittance firm Ripple. Moreover, Deaton argues that most early traders were unaware of the relationship between XRP and Ripple, and the purchase of the token was made on cryptocurrency exchange platforms. These facts, according to Deaton, shed light on why the US SEC’s argument of “a common enterprise” is flawed and an appeal is unlikely to affect the fate of XRP holders.
According to Judge Analisa Torres’ ruling, XRP token is not an investment contract or security in open-market sale transactions. The pro-XRP attorney explains this fact is likely to stay true and the ruling is unlikely to be overturned, even following the appeal by the regulator.
XRP is trading at $0.6985 at the time of writing.
SEC vs Ripple lawsuit FAQs
Is XRP a security?
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
How does the ruling affect Ripple in its legal battle against the SEC?
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
What are the implications of the ruling for the overall crypto industry?
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
Is the SEC stance toward crypto assets likely to change after the ruling?
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
Can the court ruling be overturned?
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
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