- Bailard’s code of ethics filed with the SEC in January of this year reveals that the SEC condoned an investment in XRP.
- The crypto community is speculating about implications for the SEC’s lawsuit against Ripple Labs.
In a document uploaded to the U.S. Securities and Exchange Commission (SEC) database in January, a member of the XRP community discovered an inconsistency that could be important to the case against Ripple Labs. The document includes investment rules for executives at investment firm Bailard.
Dated January 4, 2021, the firm notified the SEC of its “Code of Ethics” for its employees to maintain their “integrity” and “compliance” with regulations. Bailard tells the SEC that its executives have the ability to invest in Bitcoin, Ethereum, and XRP.
Bailard acknowledges that the regulatory framework for cryptocurrencies is complex. As a result, they state that these digital assets are “generally” considered currencies and are not considered securities. Conversely, the firm prohibited its executives from investing in other cryptocurrencies that could potentially be a security.
The investment firm thus made an important delineation in the document when it stated that its Code of Ethics is based on SEC laws and statutes:
The rules of conduct outlined in this Code are based in large part on rules of law and legal concepts developed under those statutes. (…) We believe that it is our job to conduct our business to avoid not only any violation of law but also to avoid any appearance of violation or grounds for criticism
Impact on the lawsuit against Ripple Labs
The XRP community has taken notice of the document and speculated about the impact it will have on the ongoing lawsuit. Attorney John E. Deaton who filed a motion to intervene on behalf of over 10,500 XRP owners stated he will include it in his “treasury.”
Meanwhile, attorney James Filan (@FilanLaw) stated that the investment firm’s statement will likely have no impact on the litigation process. However, he did not dismiss that Bailard had notified the Commission and that the regulator accepted the document in spite of its content. Filan said:
Maybe they did. Maybe Ripple will find out in discovery. It could also be what cryptonym said, that market sentiment/participants viewed it as a crypto currency similar to btc and eth. That’s the hard part about this – we are all just guessing.
Filan then added that the document could serve as a resource for Ripple’s legal team. In the discovery phase, the lawyers could ask for information about communications between the SEC and Bailard concerning XRP, BTC, and ETH. Filan added:
So while a Code of Ethics is required by SEC rules, I don’t think a statement by another company in its Code would provide Ripple with something it could (without more) necessarily rely on in litigation with the SEC. […]
Maybe Bailard did have discussions with the SEC and Stuart Alderoty [General Counsel @Ripple] will be able to make a discovery demand that specifically asks for any information regarding discussions between the SEC and Bailard regarding all three cryptocurrencies. This was what I meant when I said “without more”. If they had those discussions, that would be “more”. Maybe we will get lucky.