- According to Hogan, the motion to intervene pens the door for a partial settlement for Ripple with regard to all XRP sales until December 2020.
- The intervention could thwart the SEC’s two-pronged strategy, which has not yet determined whether it is concerned only with past XRP sales or with XRP’s status as a security per se.
As CNF reported, the U.S. Securities and Exchange Commission (SEC) and Ripple have already submitted their comments on Friday regarding the intervention by attorney John E. Deaton on behalf of over 10,500 XRP holders. While the SEC letter indicates they do not want to provide clarity for the secondary XRP market, Ripple’s attorneys are proposing more limited participation rights, such as “enhanced amicus status,” if the intervention is rejected.
One of the XRP community’s favorite lawyers, Jeremy Hogan, has now published his legal analysis on both reply letters. According to Hogan, Ripple is using the XRP holders’ motion to attack the SEC. For XRP holders, meanwhile, the right to intervene would mean that they become a party to the litigation.
This would give them the opportunity to participate in the discovery phase and, as Hogan stated, “perhaps most importantly for them to submit a motion for summary judgement to the judge in which personal statements by individual XRP holders could be submitted to show the judge how the lawsuit by the SEC which is supposed to protecting them is instead hurting them.”
Does the motion to intervene open the door to a partial settlement for Ripple?
For the SEC, the intervention is “a big deal” because by claiming that Ripple has been selling XRP as unregistered securities to date, it would imply that XRP holders also hold unregistered securities in their accounts. While Ripple is trying to argue from a legal perspective that each individual XRP sale should be considered on its own, the SEC wants all XRP sales to be considered as one big 8-year sale.
Ripple is once again exposing the SEC with their response by revealing that the SEC’s claim is so vague and inconclusive because they want to leave themselves two ways open.
It’s so vague that the SEC can argue that all XRP are a security or, if it so decides, it can say, ‘oh no judge, we never suggested individuals are selling unregistered securities because we are supposed to protecting the people’.
And what Ripple is doing, they are piggybacking of the motion to intervene and calling out the SEC on this and saying, ‘You have to choose, are you alleging XRP is kindly inherently a security or is this lawsuit only about sales by Ripple and Garlinghouse.
In addition, Ripple is also supporting the #relistXRP movement by wanting to force clarity for the secondary market, as Hogan analyzed. With their response, Ripple is saying:
Hey SEC, if you don’t want this motion to intervene granted, then just confirm to the court that you are not trying to establish that XRP is per se a security, and we might agree that there is no reason for them to be involved.
At the same time, Ripple is exploiting the motion to intervene to indirectly propose a settlement regarding all XRP sales after the filing of the lawsuit:
Perfectly reasonable but also the perfect trap, or maybe it’s a settle outline of an offer of settlement. […] What Ripple is suggesting essentially is a settlement in which the SEC agrees to let go all current and future sales, and only continue to litigation as to the pre-lawsuit sales.
Conversely, this would mean that XRP holders, exchanges, and Ripple would have clarity for its escrow account and business model and would not be subject to SEC scrutiny. This would be exactly what Ripple wants. And according to Hogan, the SEC could potentially be in favor of the solution as well. As evidence, Hogan cites that the SEC’s response talks exclusively about sales “through December 2020,” when the lawsuit was filed.