Thread by @JohnEDeaton1

WERE RIPPLE EXECUTIVES RECKLESS - 🧵

In order for @chrislarsensf & @bgarlinghouse to lose the individual claims made against them, the judge has to conclude, as a matter of law, the two executives were reckless in not knowing #XRP was a security. Not negligent - but reckless!

https://twitter.com/sashahodler/status/1600336414494715905

Said another way, the judge must find that no reasonable jury could ever conclude that the 2 executives were NOT reckless.

With that in mind, let’s consider some FACTS:

1) SEC enforcement lawyers were allowed to own and trade #XRP until March of 2019;

2) in 2014 the @USGAO classified #XRP “a virtual currency utilized in a decentralized payment system called @Ripple”;

3) in 2015, FinCEN and the DOJ settled w/Ripple declaring #XRP a virtual currency - forcing Ripple to register #XRP sales w/ FinCEN, NOT w/the @SECGov;

4) also in 2015, the @CFTC stated that #Bitcoin and other similar crypto currencies are “properly classified commodities”;

5) in 2018, Hinman declared #BTC & #ETH non-securities and said there were other networks sufficiently decentralized (ie what the GAO said re XRP in 2014);

6) in 2019, the SEC published its Framework for Digital Assets and in that document it clearly states that any crypto asset that can immediately be used for payments and as a substitute for fiat currency “is unlikely to satisfy Howey” (the precise use case for #XRP);

7) also in 2019, the #FSOC Annual Report highlighted #XRP, along w/#BTC , #ETH and #LTC as virtual currencies gaining
in market cap -

TAKE A LOOK AT THESE SIGNATURES 👇
on the 2019 FSOC annual report;

8) in Jan. 2020, companies like Bailard, filed SEC Ethics disclosures informing the SEC not to worry about Bailard trading unregistered securities w/digital tokens b/c Bailard was ONLY going to trade the 3 Crypto Assets GENERALLY ACCEPTED as NOT securities: #XRP, #BTC & #ETH;

9) in 2013 - yes 7 years before the lawsuit - @chrislarsensf gave a presentation to the SEC, CFTC, Federal Reserve & Treasury Department about Ripple’s plans to disrupt the global payment system by utilizing #XRP (SEVEN YEARS BEFORE THE LAWSUIT);

10) in June 2018, SEC enforcement lawyers wrote an #XRP Howey Memo 📝 analyzing if #XRP satisfied the Howey test and at the end of that #XRP Howey analysis - conducted BY SEC ENFORCEMENT LAWYERS (you know, experts in Howey) - they did NOT recommend enforcement or cease & desist;

11) in January 2019 Coinbase and its sophisticated expert lawyers in Howey, met with the SEC informing it that Coinbase’s experienced securities lawyers concluded #XRP was NOT a security (at least, not in 2019) and Coinbase listed #XRP a month later in February 2019.

There are more FACTS that I could recite in this 🧵 but this is off the top of my head as I sit and wait at the dentist 🦷 office.

But I ask you - EVEN IF YOU HATE Ripple:

With the evidence cited above, could a reasonable jury conclude that Brad & Chris were not reckless?

Remember, they can be negligent, but the burden of proof is they must be found RECKLESS - meaning no reasonable person could believe that XRP was NOT a security.

Be honest: you didn’t get through all 11 facts before agreeing the SEC isn’t winning on summary judgment w/this one.

I’ve written (meaning my law firm) and/or argued hundreds of summary judgment motions during the last 20 years, and I can confidently say Garlinghouse and Larsen have a better chance at summary judgment on Recklessness than the SEC does.

(a judge likely lets a jury decide)

Jay Calyton, Hinman and Marc Berger did a HUGE favor to Ripple in suing the 2 executives. There’s no allegations of fraud, misrepresentation or omission alleged against these executives. In a non-fraud case the SEC usually wouldn’t sue the individual executives.

This was personal and it was a stupid decision by the SEC. In March of 2021, I tweeted out that suing the 2 executives would prove to be a dumb decision because it placed a higher burden on the SEC to prove.

Let’s be honest, this was hard ball intimidation tactics by the SEC.

What was the 1st thing the SEC tried to get in discovery? All of Larsen’s & Garlinghouse’s individual banking records. Although they gave the SEC proof of every #XRP transaction ever made by Ripple and these 2 executives, the SEC wanted banking records, credit card statements etc

The SEC was playing the role it plays best: BULLY.

If they didn’t charge the two executives w/ aiding and abetting, the Hinman emails may never have been ordered to be turned over.

Judge Netburn specifically held that the way the SEC treated and evaluated #BTC and #ETH was relevant when considering the objective standard to be applied to the recklessness issue.

Clayton and the SEC made a big. mistake.

Why?

That’s what happens when the SEC enforcement action that you’re filing isn’t just about enforcing securities laws but involves other additional reasons or motives.

If the Ripple #XRP case was strictly about enforcing U.S. securities laws, the case would’ve been over long ago.