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U.S. Lawyer on SEC’s Lawsuit Against Ripple Over Sale of XRP: ‘This Is a War’

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Late last week, American attorney James K. Filan, who has been following the SEC’s lawsuit against Ripple, explained to XRP HODLers and other interested parities why they should not be expecting some kind of settlement any time soon.

Filan is the founder of Filan LLC. He “represents individual and corporate clients in federal white collar matters, securities litigation, corporate and government investigations, complex civil and criminal tax controversies and complex civil litigation in both federal and state courts.” Filan also has nine years of experience as a federal prosecutor (in the United States Attorney’s Office for the District of Connecticut).

On 22 December 2020, the SEC announced that it had “filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.” The two Ripple executives being sued by the SEC were CEO Brad Garlinghouse and Chairman Chris Larsen. 

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The basis of Ripple’s defense against the SEC’s allegations is that it believes that XRP was never a security (since it fails the Howey Test, meaning that it is not subject to U.S. securities laws) and that even if the court comes to the conclusion that XRP was/is a security, there has been such a lack of regulatory clarity when it comes to crypto that Ripple is entitled to use the “Fair Notice” defense, i.e. that did not have reasonable fair notice from the SEC about whether its sales of XRP tokens would be deemed illegal sales of unregistered securities. Ashton Kutcher Discusses What’s Next in Crypto Space, Selling Back Ticket to Space

On July 30, American lawyer Filan took to Twitter to explain why he expects this lawsuit to take a long time to get resolved.

Filan said:

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  • Neither side seems to be willing to give an inch.
  • The deposition of William H. Hinman, the SEC’s former Director of the Division of Corporation Finance, apparently has already happened (reportedly on July 27 even though it was originally scheduled for June 30).
  • He believes that Ripple managed to get the names of the people to whom Hinman spoke (and what was said) prior to his famous speech in June 2018 and that Ripple must currently be “interviewing those people.”
  • He doesn’t think “a settlement is coming anytime soon” in this “war” between the SEC and Ripple, which means that “we should settle in for the long haul.”
  • Whichever party loses “will appeal the decision.”

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Ripple Vs SEC

Judge Grants SEC’s Request To Extend Discovery Phase of Lawsuit With Ripple by Two Months

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A federal judge has granted the U.S. Securities and Exchange Commission’s (SEC) request to extend the discovery phase of its lawsuit against Ripple by an additional two months, according to new case documents.

Judge Sarah Netburn says in a new order that the additional time requested by the SEC will not impact “the schedule to resolve the case.”

“Rather, the additional time sought by the SEC will allow both sides to complete the outstanding fact discovery and properly prepare for expert depositions.” 

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The discovery phase is a pre-trial stage of a lawsuit where both parties present relevant information and evidence.

The SEC asked to extend the deadline for expert discovery from November 12th to January 14th, citing the need for “sufficient time to prepare rebuttal reports and depose a minimum of 14 expert witnesses.” The regulator argued such an extension wouldn’t extend the case’s timeline.

Ripple opposed the January 14th extension, arguing that expert discovery should only be extended to December 10th, saying the two-month extension “would needlessly prolong discovery.”

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Attorney and crypto legal expert Jeremy Hogan, who is a Ripple supporter, disagrees with Judge Netburn about the extension’s impact on the lawsuit’s timeline.

Says Hogan on Twitter,

“Well, that is ‘no bueno.’

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Judge argues that the additional time will not affect the schedule to resolve the case, but I don’t see how that is possible; it HAS to affect the schedule for briefing summary judgment.

Case summary judgment resolution now not until March-May 2022.”

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Ripple Vs SEC

XRP Lawsuit: Ripple appeals the Court to Disclose SEC’s in-camera review documents

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The latest update in the XRP lawsuit saw Ripple respond to SEC’s letter with the explanation for its privilege assertions along with a redacted version of the three additional documents requested by the defendants for in-camera review. Ripple has requested the court to disclose these documents to the defense and has further continued to argue against the plaintiff’s repetitive “privileged” stance.

Ripple objects to SEC’s entitlement to keeping secrets under DPP

Ripple has contended SEC’s “pre-decisional” or “deliberative” argument for the three additional documents, noting that the commission has failed yet again to identify any specific policy process related to these or other documents, as it is required to when seeking protection under DPP. Ripple argued that the SEC claims against disclosure of discussions are weak and do not stand any legal relevance.

SEC asserts that “how to structure a forum the SEC intends to use to communicate with industry participants” is deliberative or would reveal its “mode of formulating or exercising policy-implicating judgment,”. However, the defense objects to the plaintiff’s assertions’ insufficiency to invoke DPP and states that if this argument is considered valid in the court, then that would extend the invalid privilege to virtually every document or communication in a federal agency.

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“The fundamental problem with the SEC’s approach is that the agency apparently believes that it is entitled to operate in secret, and to withhold from actual litigants, whose reputations and livelihoods are at stake due to its own affirmative litigation choices (as opposed to the general public pursuant to FOIA), any internal documents that relate to its mission, broadly defined. This approach finds no basis in law because it turns on its head Congress’ lawfully enacted presumption of openness in government documents, subject to circumscribed, narrow exceptions.”

While the Court granted Ripple’s September 24 appeal, seeking the addition of three documents by the SEC for in-camera review, it still has not permitted disclosure of mentioned data to the defendants. These documents include the two documents related to the SEC’s meetings with law firms, along the email trail concerning discussions with a third party who received guidance from the SEC to analyze its digital asset under the framework set forth in Hinman’s June 14, 2018, speech.

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Ripple (XRP) Committed to the Crypto Climate Accord (CCA) To Provide for Sustainability

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With cryptocurrency becoming mainstream, to provide for a long-term future together sustainability practices are very important.  Major Fintech companies like PayPal, Visa, Tesla, and several others leverage this technology.  This in turn has led to increased energy consumption to already unsustainable levels. To break even, the industry has a choice to make.  Either continue down the unsustainable path to be doomed or work together and reduce the collective environmental impact.

Decarbonizing public blockchains is about bringing down the carbon footprint.  In2020, Ripple partnered with Energy Web (EW) and the Rocky Mountain Institute (RMI) in their efforts to decarbonize public blockchains beginning with the XRP ledger. Further, Ripple has pledged to achieve carbon net-zero by 2030 or sooner.

Ripple is committed to the Crypto Climate Accord (CCA), which is a new initiative organized by EW, RMI, and the Alliance for Innovation Regulation (AIR) to ensure that the cryptocurrency industry is 100% renewable.

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Ripple will also be joining more than 20 supporters from different industries and blockchains, which consists of the United Nations, CoinShares, Compass Mining, the XRP Ledger Foundation, and ConsenSys to provide for sustainability and scalability, thus creating value for all.

The cryptocurrency market cap is at $2 trillion, which is twice the previous all-time high that was reached about three months ago, thus underscoring how quickly this industry is growing.

The growth of the cryptocurrency industry comes at a cost.  The damages caused by climate change cover for nearly 3% of GDP by 2060. The challenge to sustain global financial prosperity without compromising on the environment is a thing to be considered.

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Emissions reduction and renewable energy use are steps to ensure progress in the right direction.

The Paris Climate Accord, fintech, and crypto industry leaders have partnered to set the objectives to ensure sustainability.

Key objectives include: “Enable all of the world’s blockchains to be powered by 100% renewables by the 2025 UNFCCC COP Conference; Develop an open-source accounting standard for measuring emissions from the cryptocurrency industry; Achieve net-zero emissions for the entire crypto industry, including all business operations beyond blockchain and retroactive emissions by 2040.”

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Ripple’s journey in ensuring sustainability consists of recognition of financial technologies like blockchain and cryptocurrency to position financial empowerment without compromising on the sustainable future. Thus, providing for the critical years of commitment in the process of cryptocurrency adoption. Reverse engineering the characteristic of the technology after progress has been achieved can be tricking and sustainability will, in turn, have to wait longer.  Therefore, Ripple is leading the effort and they feel it is time to solve the problem now.

Ripple is committed to progressing this effort by a strategic partnership with organizations like Rocky Mountain Institute, Energy Web, and AIR, eventually contributing to policy ideas and financing for innovations to help achieve the long-term objectives of Accord.

The attempt is expected to save the global economy an estimated $26 trillion by 2030, contributing to a robust and sustainable global financial system leading to a sustainable world.

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