John E Deaton Profile picture
Jan 8, 2023 25 tweets 11 min read Read on X
On January 30 at 3 pm there’s a hearing in the @LBRYcom case. I’ve been admitted in the case and filed an appearance on behalf of @naomibrockwell. It is my honor to represent Naomi, who epitomizes the need for regulatory clarity regarding users and secondary market transactions.
Naomi has NEVER purchased a single #LBC AND has NEVER sold #LBC.

She EARNED the #LBC she owns through user tips, purchases by viewers, and user rewards.
Naomi has NEVER cashed out any of her #LBC because it is far more valuable to her to keep the #LBC attached to her channel because “staking” helps her videos get viewed by a larger number of people.
Again, to this day, Naomi Brockwell has NEVER purchased or sold a single #LBC.

Naomi USES the LBRY platform every single day. As a content creator, it is a great place for her to build an audience and feel comfortable that her channel is not going to be taken away from her.
Isn’t that one of the beauties of a decentralized platform and why we need an alternative to YouTube?
During the last five years, Naomi has accumulated all of the #LBC tokens that she owns by utilizing her channel.

Naomi wasn’t even aware that the #LBC tokens that she had accumulated, through her channel, had a monetary value associated with them - until only a few years ago.
Again, she has NEVER sold or bought any #LBC tokens. She uses the tokens on a daily basis in the ordinary course of her business to post content, to give her content more visibility, and to access certain videos.
On Nov. 7, 2022, the Judge in @LBRYcom, entered an Order granting the SEC Summary Judgment. The Court’s Order does not reference secondary market acquisitions of #LBC. Nor does it address #LBC token holders, like Naomi, who acquired #LBC for non-investment purposes.
The Court did conclude, however, that many individuals, like Naomi, acquired #LBC for consumptive use only.

At the July 20, 2022 hearing, Judge Barbadoro said:

“I think this record does contain evidence that there are consumptive uses for #LBC. I think that's undeniable.”
In my Amicus Brief, I cite @NYcryptolawyer’sincredibly important article “The Ineluctable Modality of Securities Law: Why Fungible Crypto Assets Are Not Securities, dated Nov. 10, 2022 and I attached the ENTIRE ARTICLE as Exhibit B to my Amicus Brief.
I cite Lewis’ article that the Judge’s Order “failed to distinguish among the sales that were made to purchasers that had a bona fide consumptive intent and those who were offered, and who purchased, #LBC tokens w/a reasonable expectation of profit from the efforts of LBRY.”
There was a Court hearing on November 21, 2022. I have the Court transcript and I can tell you that the transcript is pure 🔥 and that Judge Barbadoro is keenly aware of the issue. The fact that he granted a hearing and allowed the amicus briefs is proof positive.
Due to local rules, I cannot publish the transcript on @CryptoLawUS for some time.

The purpose of the November 21 hearing was to discuss the appropriate remedies sought by the SEC.

@jeremykauffman spoke up and offered to divest @LBRYcom’s all remaining pre-mined #LBC tokens.
Doing this would mean that no secondary token holders could be argued to have a reasonable expectation of profit based on the entrepreneurial or managerial efforts of LBRY.
At the November 21, 2022 hearing the word clarity in relation to secondary market transactions appears a dozen times. The Judge recognized the need for clarity and urged the SEC to work with LBRY to resolve the issues, including by providing clarity to secondary #LBC holders.
According to LBRY, it “provided the SEC with a settlement proposal consistent with the framework laid out by the Court.”
After the parties were unable to reach a resolution consistent with the Judge’s suggestion, including clarity regarding secondary market sales, LBRY filed a Motion to Limit the SEC’s Remedies.
The SEC has responded and it will not offer any clarity regarding secondary market transactions. The SEC attorney said, in so many words, that that’s not what the SEC does.

Instead, the SEC is seeking a permanent injunction and you can read it for yourself. 👇👇 🤦 ImageImage
Clearly, Naomi, as well as hundreds of thousands of other users, have significant interests as secondary market token holders – people who have not transacted with, or purchased #LBC from LBRY or its executives, and who do not view #LBC as an investment.
I argue to the Court that, today, #LBC holders, like Naomi, arguably have a greater interest than LBRY. I point out that the Judge recognized that LBRY “could go out of business today and the LBRY blockchain would continue in perpetuity just like the #Bitcoin blockchain.”
LBRY has indicated that it will be dissolving the corporate entity. Thus, there are many holders, like Naomi, who want to use #LBC on the LBRY blockchain and should be able to do so without confusion over whether secondary sales are restricted.
If you could read the transcript you would understand why this hearing is so important. The over broad injunction proposed by the SEC alone speaks for itself.

There are over 1M users of the LBRY blockchain daily.
I met @Scaramucci’s Professional Crypto Trader at a function that I was speaking at (his card is in my office). I brought up #LBC to this professional crypto trader. He responded: “I’ve never heard of it.”

Ask yourself, how many people are truly speculating on #LBC’s price?
Plus, the SEC has stipulated that many if not the majority of #LBC holders are users and have no investment intent. The SEC couldn’t prove the first prong of Howey let alone all the prongs related to these transactions. But it refuses to issue a no action letter or give clarity.
I don’t know what the Judge will do, but I know that this January 30 hearing is a very important hearing.

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More from @JohnEDeaton1

Nov 29, 2023
“Clayton - in his final act - is picking winners and trying to limit US innovation in the crypto industry to BTC and ETH.”
-@bgarlinghouse on 12-21-20

Now consider this: 2 months before that final act by Clayton, #OneRiver made a $1B bet on #BTC & #ETH, and once Clayton left the SEC, he almost immediately joined #OneRiver.

Also consider that Clayton’s law firm, Sullivan & Cromwell (who he was receiving money from) represented @Consensys and @ethereumJoseph and brokered the deal where Consensys acquired JP Morgan’s Quorum which was pushing/utilizing the #JPMCoin. Lubin constantly claimed that he did not consider #XRP or @Ripple as competitors - even though the WEF thought otherwise: 👇

Image
Consider that during his deposition, Hinman admitted that he was the one who reached out to Joe Lubin to discuss #ETH. When asked by Ripple’s lawyers whether Clayton was the one who asked Hinman to reach out to Lubin and Consensys, Hinman testified that he couldn’t recall whether Clayton had suggested it. 🤔
However, Hinman did testify that Clayton inquired about how the meetings were going with the #ETH folks. Clayton asked Hinman MORE THAN ONCE about those very meetings. Clearly, Clsyton had a vested interest in those meetings.

Do you have any idea how many meetings Hinman had as Director of Corporation Finance that Clayton didn’t ask about?
Read 7 tweets
Jul 24, 2023
FIRST ME - NOW 👩‍⚖️

I’ve been fighting tribalism and echo chamber politics for the last three years. In 2013 SEC Officials were calling #Bitcoin a security. Unfortunately for me and my family, I wasn’t aware of #Bitcoin in 2013. Where was @maxkeiser when I needed him the most? 😂
If I had owned #BTC in 2013 and those same SEC officials had sued the #Bitcoin Foundation and/or #BTC Miners, I would’ve sued the SEC - just like I did regarding its gross overreach related to #XRP.
In 2020 had the SEC sued @VitalikButerin @ethereumJoseph and the @ethereum foundation alleging today’s #ETH is a security, including in the secondary market, instead of @bgarlinghouse @chrislarsensf and @Ripple, I would’ve 💯 sued the SEC - just like I did regarding #XRP.
Read 32 tweets
Jun 19, 2023
I understand Marc’s comment that secondary sales are an open legal question and whether a Howey analysis must be applied to secondary market transactions. But when you look at the existing case law in totality it strongly favors that you must apply Howey at each subsequent sale.
If an investment contract remained one in perpetuity it would nullify the common enterprise factor moving forward.
Hypothetical:

Ripple sells XRP to Johnny Crypto’s business who pays his employees in XRP. His employees have never heard of Ripple and use XRP on their debit… twitter.com/i/web/status/1…
The employee owes his friend $500 but, instead he gets the friend to accept 1K XRP. The friend has the $1K XRP sent to his @UpholdInc XRP address. That friend hires @attorneyjeremy1 to write up a contract and asks Jeremy if Jeremy will accept XRP as payment, which Jeremy does.
Read 15 tweets
Jun 19, 2023
HINMAN DEPOSITION:

They didn’t redact the spelling of @ConsenSys. Hinman says he had 4-5 meetings w/them but maybe one was a phone call. This is between December 13, 2017 and June 8, 2018. We know for sure of 4 actual meetings. The meeting w/@VitalikButerin makes a minimum five. ImageImageImageImage
Notice the email referenced in his testimony. This is one of the emails that @EMPOWR_us is fighting to get released but the SEC has refused to turn over. Now notice that Jay Clayton spoke with Hinman specially about the @ConsenSys meetings at least 1-2 times. ImageImageImage
What is significant about this? Clayton’s law firm is Sullivan & Cromwell (S&C). @ethereumJoseph had hired S&C to represent Consensys shortly after Clayton’s nomination as Chairman. We can all agree that that was a very smart and savvy move by Joe.
Read 19 tweets
Jun 17, 2023
Dear @BeckyQuick, (@andrewrsorkin @JoeSquawk)

Listen to yourself please. You said this issue was always in your inbox or feed. You said you tried to do research and looked into it. You’ve always presented as a conscientious journalist, so I believe that you did look into it.
If it was baseless, you wouldn’t have even asked Clayton the question. Becky, it’s not just about Bill Hinman and his conflicts of interests that are involved in the @Ripple XRP case. You know very well that there is, at a minimum, a gross appearance of impropriety.
Clayton’s law firm, Sullivan & Cromwell, represented @ConsenSys and @ethereumJoseph. Jay’s former law partner became Deputy General Counsel of Consenys and Sullivan & Cromwell brokered Consensys’ purchase of Quorum and the #JPMCoin from @jpmorgan. 👇

consensys.net/blog/press-rel…
Read 11 tweets
Jun 16, 2023
HINMAN’s DEPOSITION WAS JULY 27, 2021 - LONG BEFORE JUDGE TORRES ORDERED THE EMAIL SPEECH DOCUMENTS TO BE PRODUCED

Judge Torres’ Order is dated 9-29-22
@s_alderoty’s and @bgarlinghouse’s tweets about receiving the documents is on 10-22-22 - 15 months AFTER the deposition.
IN OTHER WORDS:

HInman didn’t know the documents would be turned over. In fact, the SEC lawyer instructed Hinman NOT to answer questions because of the very privileges the Judge ultimately denied.
Read 5 tweets

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