Thread by @JohnEDeaton1

#NickMorgan, on behalf of #ICAN, and myself, on behalf of @naomibrockwell filed motions for leave to file amicus briefs in support of @LBRYcom’s Motion to Limit the @SECGov’s Remedies.

Among other things, the SEC is seeking a permanent injunction, regarding the sale of #LBCs.

https://twitter.com/nycryptolawyer/status/1603558113700827136

LBRY’s CEO, @jeremykauffman, agreed to dissolve LBRY and burn all existing pre-mined #LBC. With no #LBRY and no #LBC, he informed the Judge👨‍⚖️ that clearly it can’t be argued that secondary market #LBC holders and users are relying on LBRY’s efforts moving forward.

The Judge 👨‍⚖️ held a status conference on Nov. 21. I’ve read the notes 📝 from that conference and when the transcript is published, people will learn that @jeremykauffman spoke up directly to the Judge informing him that #LBC users deserve clarity regarding his decision.

The Judge literally stated “I am sympathetic to what Mr. Kaufman is saying.” The Judge also informed the SEC that he strongly believed that the SEC should provide clarity regarding secondary market transactions of #LBC by users who do not view #LBC as an investment.

The SEC, in so many words, stated that it doesn’t do that - it doesn’t make policy statements in a remedies agreement. The SEC has also made clear that it will not issue a No Action letter regarding users or secondary market transactions involving #LBC.

Jeremy Kaufman advised us of what was going on and therefore we, ICAN and Naomi Brockwell, asked to file Amicus Briefs on the issue.

The SEC did not object to us asking for permission to file the briefs (although the SEC reserves the right to object to what we ask for and say).

We filed motions seeking permission to file amicus briefs and we attached the briefs to our motions.

The Briefs we filed are arguably more important than the amicus briefs that were filed in the @Ripple / #XRP case, including the one I filed on behalf of 76K #XRPHolders.

Even though I said “arguably,” my statement is likely to surprise many people. As expected, the SEC cited the #LBRY decision multiple times in its Reply Brief to Judge Torres in the #Ripple case. The decision in #LBRY doesn’t address secondary market transactions at all.

Nothing has changed about my opinion that the #LBRY decision ultimately won’t have a huge impact on the #Ripple decision. The cases are super distinguishable and are in different circuits w/ different controlling precedent. Plus, #LBRY didn’t contest 2 out of the 3 Howey factors.

However, there is one overriding general issue involved in both cases, regardless of which token is being discussed.

That issue is the status of the token itself and secondary market transactions completely independent of a promoter or a company (#Ripple/#LBRY).

In the Amicus Brief that I submitted, I reference @NYcryptolawyer’s comprehensive study reviewing every single relevant federal appellate case that has applied Howey. 👇👇

I point out to the Judge, several things regarding Lewis Cohen’s extensive article.

First, the study confirmed that no federal appellate court has ever held the underlying asset subject to an investment contract transaction, is itself an investment contract.

Second, there is no federal case finding a subsequent transfer of an asset utilized in an investment contract transaction to also constitute a securities transaction.

Third, and possibly more important, I point out that Lewis Cohen’s article discusses the Judge’s decision itself - in the LBRY case - and that it states that his ruling has been interpreted to:

“characterize LBC itself as a security”

and

that his decision could be interpreted to be “ruling that the offer and sale of LBC tokens (apparently all offers and sales, regardless of the specific circumstances of the transaction) violated Section 5 of the Securities Act...”

That citation is on page 83 of Lewis’ article.

Jermey Kaufman spoke up and informed the Judge that the the Judge was unaware of the amount of confusion his decision was having - not just for LBC token holders/users who have nothing to do w/LBRY - but also on the entire blockchain industry. Again, the judge was sympathetic.

Naomi Brockwell also deserves a ton of credit for standing up and allowing her example to be argued before the Court. Naomi informed the Judge that she has NEVER purchased an #LBC token. Likewise, she has NEVER sold an #LBC token.

She informed the Judge that when she first acquired #LBC through the use and operation of her channel, she had NO IDEA that #LBC even had a monetary value associated with it. We point out that no way could her acquisition of #LBC be classified an investment contract.

I have no idea what the judge will do. I made a suggestion to the Court in footnote 9:

“In considering the briefing on the effect of the Court’s ruling on, inter alia, the nature of the token itself and secondary sales, the Court is empowered to, in essence,

construe LBRY’s Motion to Limit the Commission’s Remedies as a Motion for Clarification of the Court’s Summary Judgment Memorandum and Order. Since the SEC refuses to clarify secondary market LBC transactions, a clarification of the Court’s order is appropriate.”

Hopefully, the judge agrees to distinguish secondary market transactions and users of the platform. It will still remain only one district court judge’s decision, but it could be used to limit the SEC’s arguments against tokens themselves.

You can find both ICAN and Brockwell’s briefs on my Crypto-Law.us site. Both briefs are only 8 pages long.

You can find @NYcryptolawyer’s article 👇

https://twitter.com/nycryptolawyer/status/1590850797583372288