Ripple one step closer to victory in court against SEC
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10 min
At last Friday's hearing in the SEC's case against Ripple, two legal memoranda from 2012 were revealed, stating that the cryptocurrency XRP is unlikely to be considered a security under US federal laws.
Recall that the SEC case against Ripple began on December 22, 2020, when the regulator accused the cryptocurrency company, as well as its founder Chris Larsen and CEO Brad Garlinghouse, of selling more than $1.3 billion in unregistered securities. According to the regulator, the blockchain company had illegally raised capital to fund its operations by selling XRP to investors since 2013.
Ripple issued a formal response a few days later, where it called the SEC's actions politically motivated and stressed that the charges were unsubstantiated.
A key argument in Ripple's defence is that not only did the company does not know that XRP could be classified as a security, but it also took steps to ensure that the cryptocurrency was not seen as such an asset. On February 18, two legal memoranda from 2012 were disclosed in court that support Ripple's position.
For example, the first document states that in early 2012, international law firm Perkins Coie advised Ripple not to conduct a sale of NewCoin (formerly called XRP) through a procedure similar to an ICO (initial coin offering), as the regulator could then see it as an illegal securities offering.
As a result, Ripple decided to review its business model and develop a new plan, which was resubmitted to Perkins Coie for analysis in October 2012. In a second memorandum, the law firm says that the new XRP is unlikely to be considered a security, but “there is a risk that the SEC may disagree with that assessment”.
Lawyer James Phelan, who has been following the case closely, has published a series of posts on his Twitter account. In them, he shared Perkins Coie's official documents, and stressed that publishing them could help the cryptocurrency company emerge victorious.
I think Ripple has taken a proactive stance, which is very important. There is nothing in these memos to suggest that the company acted recklessly or ignored any risks. On the contrary, these memos say otherwise: Ripple acted with caution, James Phelan wrote on his Twitter.
On Feb. 19, the price of XRP jumped 10 percent to $0.79 per coin amid the release of the documents. The cryptocurrency is currently trading at $0.76, as the altcoin's price has fallen amid a general correction in the cryptocurrency market.