Key Points:
- Reveal of Concealed XRP Memo from 2018
- Arguments Over SEC’s Handling and Memo’s Implications
- Ripple’s Defense and XRP’s Usage History
The cryptocurrency community is abuzz with renewed fervor following revelations by prominent pro-XRP advocate and attorney, John E. Deaton, about the existence of a concealed XRP memo dating back to 2018.
Long-Concealed SEC Memo Brought to Light
On August 27, lawyer and digital analyst Bill Morgan responded to a query from Sandy Seth, a fellow user of XRP. Seth had inquired whether the U.S. Securities and Exchange Commission (SEC) possessed a memo affirming that XRP did not meet the criteria of the Howey Test.
This inquiry set off a chain reaction of discussions and debates about the ongoing Ripple case, prompting Deaton to share insights into the memo’s contents.
Despite his strong support for Ripple’s position against the SEC, Deaton initially denied allegations of disclosing that the memo concluded XRP was a security. Instead, he clarified that the memo’s details were not publicly available. However, he did reveal that the memo was authored by the enforcement lawyers at the U.S. Securities and Exchange Commission (SEC).
I am not sure to what comment of @JohnEDeaton1 you refer but there was a memo the court did not order to be disclosed in which the SEC considered the issue and I think I recall John saying that had they concluded XRP was a security the SEC would have disclosed it. https://t.co/SIahrjWMaF
— bill morgan (@Belisarius2020) August 27, 2023
Deaton also mentioned that the memo was inconclusive. He cited the reasoning that if the memo had indeed labeled XRP as a security, the SEC would have taken legal action against Ripple rather than keeping it under wraps.
The lawyer did raise the possibility of the SEC resorting to unjustifiable tactics to advance the Ripple case. Notably, crypto critic John Reed Stark had also called for a thorough investigation. Stark previously remarked in an XRP-related post, “I believe Ripple will ultimately lose but also believe that if there were unlawful acts by an SEC official, then the IG should investigate.”
Deaton Puts Forth a Strong Defense of XRP’s Security Classification
Deaton articulated arguments about the SEC’s familiarity with Ripple’s activities over the years. He highlighted how numerous well-known exchanges and crypto companies had integrated XRP for payments or listed it on their platforms. According to him, this usage pattern should validate XRP’s non-security status.
“More than 1700 vendors accepted XRP for payment, including Time Magazine. In 2019, the Financial Stability Oversight Council (FSOC) featured XRP, along with Bitcoin, Ether, and Litecoin, in its annual report, acknowledging the substantial growth of these ‘virtual currencies’ in market capitalization. Every significant financial leader in the U.S. Government endorsed that report, including Jay Clayton,” explained Deaton.
He further pointed out, “In 2019, MoneyGram filed an SEC form disclosing its plan to employ XRP in cross-border payments.”
Additionally, Deaton revealed that in 2015, the U.S. Government initiated an independent audit to monitor XRP sales comprehensively. This auditing process extended over several years, generating three years’ worth of XRP sales data and insights for the government.
He also noted that in 2019, the SEC issued a regulatory framework for digital assets. The framework stated that a token functioning as a virtual currency and suitable for use in payments or as a fiat currency substitute would not meet the conditions of the Howey test.
The Howey test, in this context, serves to determine whether a financial instrument qualifies as a security. Deaton argued that in 2019, XRP met all the criteria to be excluded from the security classification.
In conclusion, the legal battle between Ripple and the U.S. SEC continues, with the regulator filing an interlocutory appeal to reassess Judge Analisa Torres’s ruling that programmatic XRP sales do not fall under the category of securities.
