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Feb 27 • 25 tweets • 17 min read
HOW #ETH BECAME:

“The only game in town.”

We received a tiny bit more of the Hinman deposition. He sent an email to @ethereumJoseph.👇

We don’t know which meeting w/ Lubin the email refers. Notice how @Ripple’s lawyer asked w/r Clayton directed Hinman to reach out to Lubin.
Lubin & @ConsenSys were represented by Clayton’s firm Sullivan & Cromwell. Hinman met Lubin & Consensys on December 13, 2017 and the very next day, @MattCorva, Consensys’ General Counsel, publicly stated that Consensys was building an alliance w/ the SEC.
(After 1 meeting?)🤔 👇
On April 23, 2018, Hinman met AGAIN w/ Lubin & Consensys and on May 12, 2018, Lubin stated he was “making great strides w/ regulators.”

Two weeks later, Lubin claimed he could issue tokens in ways detailed in Hinman’s speech - EXCEPT - the speech had NOT yet occurred. 🤨👇
On June 5, 2018,
@novogratz (former roommates and close friends w/ Lubin) states he will bet “dimes to donuts” the SEC will declare present day #ETH not a security (Hinman’s speech is 9 days later).

Novogratz also predicts the SEC will soon pick a token and go after it. 👇
On June 8, 2018, AGAIN, Consensys & Lubin met w/ Hinman. Afterwards, Lubin argued that the market needed the SEC to scare certain projects away.👇

6 days later, June 14, 2018, Hinman gratuitously gave his speech “putting aside the fundraising” and declared #ETH not a security.
After Hinman gave his speech, Lubin appeared on the same stage and claimed he “wasn’t able to read through Bill’s entire speech” and he asked w/r Hinman “spoke about #XRP” at all.

The moderator responded that #XRP wasn’t mentioned and Lubin replied:
“That’s interesting.”👇
On June 26, 2018,
Lubin told @TheDomino he believed Ripple and #XRP were “massively overvalued.” 👇

(When you watch or listen to the many Lubin interviews, you notice #XRP is almost always brought up by Lubin or the person conducting the interview.)
On July 6, 2018, in response to a discussion about “why we would be selling unregistered securities to Americans,” Lubin said:

“I drove lots of the legal work. We got a piece of paper in our pocket before we actually launched the token sale.” 👇

(Who is that paper 📝 from?)
2 months after the speech, August 19, 2018, Lubin said: “we got a lot of pretty high quality clarity, in my opinion” from the SEC.

He also adds that Clayton “indicated they wouldn’t be grandfathering anybody in” and that “the securities law issues are pretty close to resolved.”
Lubin also said:

“I think there are going to be some bad times for some projects going forward.”

His “thesis” is that the SEC “doesn’t want to kill blockchain” and that it will do so entirely through “positive statements” about #Bitcoin and #Ethereum ONLY.👇

How does he know?
Lubin bragged on behalf of the SEC about the great clarity it was providing to the market. Really?

Contrast Lubin’s claim of great SEC clarity w/ @HesterPeirce’s criticisms regarding the lack of clarity not just in 2018, but also the lack of clarity that still exists today.
On September 17, 2018, Lubin warned of “a reckoning coming” from the SEC for “certain projects.” 👇

Lubin seems to know a lot of insider information regarding the SEC’s intent related to digital assets not associated w/#Ethereum. 🤔

Were people trading based on this knowledge?
On October 15, 2018, Lubin said that he escaped #ETH being an unregistered security “by creating a reality through words.”👇

(What does that even mean? Is he claiming he tricked the SEC by using words and phrases like “crypto-fuel”⛽️ or “utility token”?

newyorker.com/magazine/2018/…
On January 19, 2019, Lubin said “we are big friends and fans” of the SEC (No 💩). He explained how the SEC “introduced a new construct called decentralization” and BTC and ETH weren’t securities and he pointed out that “they have not said the same about other tokens like #XRP.”👇
In the clip above 👆 Lubin claimed to know the SEC wasn’t going to find any tokens other than #BTC & #ETH sufficiently decentralized and not a security and he dropped Hinman’s name as his source.

Why does he keep highlighting that #XRP does not have regulatory clarity? 🤔
Despite boasting #ETH was given a pass for being sufficiently decentralized, on September 15, 2019, Lubin & @VitalikButerin confess:

“we needed to put out something that we knew was not scalable … figure out the developer tooling and the infrastructure that we needed to build.”
On Aug. 5, 2020, Lubin says:

“there are only 2 decentralized protocols sufficiently secure enough and decentralized enough to trust: #BTC & #ETH.”

Lubin adds b/c #BTC is too difficult to program for all developers of “value tokens”, #Ethereum is:

“THE ONLY GAME IN TOWN.” 👇
On August 25, 2020, ConsenSys acquired Quorum. Lubin described Quorum’s technology as an “interbank information network” that’s “similar to what SWIFT does” and added that ConsenSys supports JP Morgan’s #JPMCoin.

A direct competitor to @Ripple &. #XRP.👇 (watch the 2 clips)👇
Oct. 6, 2020:
Lubin admits having a “regulatory advantage” & claims “#BTC & #ETH arrived before regulators were paying attention” and “we were fortunate enough to frame our token as a utility token.” He says all altcoins are spectacularly disadvantaged when compared to #ETH. 🤨
Nov. 20, 2020: 1 month before the lawsuit Vitalik tells @brian_armstrong “we” are “getting rid of” proof of work to replace it with one “entirely based on proof of stake”.

Compare how they knew ETH wouldn’t scale & required years of additional work w/ a fully functional #XRPL.🤔
Vitalik explained this transition depends on #ETH users:

“abandoning the $50 billion base layer that they know and love and move to the one we consider better. It’s still a leap that people have to take.” 👇👇

This requires years of work by Vitalik and his team AFTER June 2018.
On May 21, 2021 @HesterPeirce is on a BIS panel w/ Lubin; despite 3 yrs of Lubin cheering how clear the SEC had been, she said the SEC “was slow to give guidance” and “frankly, we still haven’t given guidance.” 👇

Lubin cheered b/c Hinman’s speech made ETH THE ONLY GAME IN TOWN.
July 15, 2021: Lubin described how the infrastructure of his network is still being built out, with a coming hard fork to introduce a proof of stake mechanism that will “absorb” the existing Ethereum network.

The lawsuit 🆚 #XRP had been filed 8 months earlier. Ask yourself why?
Why did Lubin & Consensys have such access to the SEC? Clayton was asked about conflicts of interests. He agreed he would not vote if a company was represented by his firm.👇

But the same conflict exists if you vote to bring a lawsuit against your client’s biggest competitor. 👇
Clayton, Hinman & Berger pushed for the case to be filed as they walked out the🚪

Hinman & Berger returned to the EEA. Clayton’s firm brokered the Consensys JPM Quorum deal just prior to the lawsuit.

Grundfest (who helped #ETH) questioned the motive behind the case.

Do you?

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John E Deaton Profile picture
Feb 25
HUGE EXCULPATORY EVIDENCE:

The August 20, 2018 meeting between Clayton and Hinman with @bgarlinghouse and @JoelKatz.

This meeting is 2 1/2 months AFTER the Hinman speech declaring #BTC and #ETH non-securities.
Frustrated that only 2 of the top 3 cryptocurrencies were provided regulatory clarity, Garlinghouse and Swartz asked what they could do to achieve similar clarity for #XRP with Garlinghouse declaring:

“@Ripple is living in purgatory b/c of this lack of clarity regarding #XRP.”
At that moment, if Clayton and Hinman truly believed #XRP was a security, they would’ve informed Garlinghouse and Swartz right then right there!

Instead, Clayton responded:

“the meeting was not the proper forum for a
discussion about that topic."
Read 8 tweets
John E Deaton Profile picture
Feb 23
THANK GOODNESS FOR JAY CLAYTON

@Ripple, @chrislarsensf & @bgarlinghouse should all thank Clayton. Clayton is on video👇 w/ Grundfest (starting at 41:30) explaining how he likes to go after the individual executives b/c it changes the dynamics of the case.
Grundfest, being smarter than Clayton, cautions that when you go after individual executives it shifts a much higher burden onto the SEC. Clayton’s response to that is:

“Yeah, but it might be worth it.”

In a non-fraud case, it is simply not worth it - nor should you bring it.
If executives engage in fraud or misrepresentation they should be sued. The SEC investigated for 2 1/2 years and didn’t find one instance of fraud or misrepresentation. You can bet it would’ve charged fraud if it could’ve. Despite no fraud, Cayton filed 🆚 the two executives.
Read 6 tweets
John E Deaton Profile picture
Feb 23
PREDICTION:

The case against @bgarlinghouse and @chrislarsensf is OVER. It was over the day it was filed. There’s NO WAY the SEC can meet it’s burden. The SEC must prove the two executives had actual knowledge #XRP was a security or was reckless in not knowing.
In order to prove recklessness the SEC must prove a reasonable person would’ve known #XRP was a security b/c it was so clear and obvious to anyone at that time.

LETS REVIEW SOME OF THE EVIDENCE:

1) October 2012 Perkins Coie Memo: It concluded #XRP was not a security;
2) Until April 2018, the SEC allowed staff, including enforcement lawyers, to trade and own Crypto - including #XRP - w/o any restrictions;
Read 16 tweets
John E Deaton Profile picture
Feb 22
Last year @RoslynLayton brilliantly wrote:

“Put two and two together, and the SEC is saying that Ripple and its two top executives had to have reasonable knowledge of something seven years ago that the agency itself wasn’t sure about last Friday.”

forbes.com/sites/roslynla…
We all recently learned just how poetically accurate Dr. Layton was when she wrote that sentence last year.

Two pieces of critical evidence demonstrate her accuracy:

1) The October 2012 Perkins Coie Memo; and

2) The SEC’s June 13, 2018 legal analysis of #XRP.
The Perkins Coie Opinion Memo concluded #XRP was not a security. Although we do not know exactly what the #XRP Memo says, we know what it doesn’t say. Judge Netburn ruled the SEC’s analysis of w/r #XRP is a security is privileged so the public and @Ripple do not get to read it.
Read 12 tweets
John E Deaton Profile picture
Feb 20
Judge Netburn’s decision on the motion for reconsideration will be the biggest decision in the @Ripple case. I say that b/c I don’t believe the motion to strike the FND is a significant one b/c the Judge isn’t deciding w/r Ripple had fair notice, but only w/r it can argue it.
The reconsideration motion relates to the 63 emails containing drafts and comments regarding the Hinman #ETH is no longer a security speech. The final version of the speech discusses both #Bitcoin and #ETH. The final version does not refer or mention #XRP.
#XRP consistently battled #ETH for the number 2 Crypto behind #BTC
In January 2018 - 6 months before the Hinman speech - #XRP hit an all-time high above $3 making it the world's 2nd largest crypto.
Read 10 tweets
John E Deaton Profile picture
Feb 19
UNDISPUTED FACTS TIMELINE ADDITIONS

2012: Perkins Coie (the same law firm that helped write ✍️ Hinman’s #Ether Free Pass Speech) informed @chrislarsensf #RippleCredits (aka #XRP) IS NOT a security;

The 2012 memo warned Larsen there was a risk under the Bank Secrecy Act (BSA);
The 2012 legal memo 📝 stated that the law firm’s “analysis has never been tested by FinCEN in practice, and therefore reliance thereon is not without risk”;

The Perkins Coie 📝 was spot on b/c in:

2015: FinCEN sued @Ripple claiming it had violated the BSA;
FinCEN’s suit against Ripple was the first civil enforcement action against a cryptocurrency industry player - a case of true first impression in the industry;

Ripple settled paying 700K and agreed to comply w/ NON- SECURITIES regulations;
Read 27 tweets

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