Thread by @JohnEDeaton1

I always like to back up anything I say with facts - explaining why I believe the way I do. In the next tweet 👇 of this 🧵, I’m going to quote the @SECGov’s summary judgment argument 🆚 @Ripple. The following quote perfectly summarizes the SEC’s theory in a nutshell:

https://twitter.com/cryptonewsflas3/status/1627611829177565185

“Defendants do not dispute that they offered and sold XRP in exchange for ‘money’, which suffices to establish the ‘investment of money’ aspect of the Howey test. Defendants’ statements and efforts as to XRP...establish the other aspects of the Howey test as a matter of law.”

Now that’s an interesting way to approach the Howey Test. I’ve said in the past that the SEC is attempting to apply the functional equivalent of the “BUT FOR” test to securities laws.

The theory is:

Because Ripple executives created #XRP and the #XRPL and then undertook efforts to help create a secondary market, ALL #XRP, including #XRP traded in the secondary market constitute securities - regardless of the seller or the circumstances surrounding the sale.

We can all agree - even if you despise Ripple and believe #XRP was sold as a security - the SEC’s theory, if successful, would establish a dangerous precedent.

As I say in my amicus brief, this is not how the Howey test is applied, nor is it an example of how the law functions.

The SEC didn’t allege or prove specific transactions but claimed ALL transactions - past, present, and future - meet the Howey test as as a matter of law.

The SEC claims Ripple’s statements and efforts satisfy the remaining prongs of Howey without conducting a specific Howey analysis.

As yourself:

How does Ripple’s statements and efforts establish the common enterprise factor as a matter of law?

The SEC actually shortcuts the analysis and argues that #XRP itself - the token - represents the common enterprise.

The SEC argues:

“The escrow account’s purpose was to remind investors of the common enterprise XRP represented.”

Thus, #XRP represents the common enterprise.

Remember, the SEC argued:

“XRP, including XRP traded in the secondary market represents…the investment contract.”

Thus, #XRP represents both the investment contract and the common enterprise.

The SEC also argued:

“Ripple offered and sold XRP, for money, as a common enterprise.”

Here, the SEC literally claims that #XRP itself IS the common enterprise. 🤦‍♂️

Even if you hate Ripple, you must see the inherent flaw in the SEC’s conclusory and circular reasoning.
According to the SEC, since it represents both the common enterprise and investment contract, any purchase of #XRP automatically satisfies all prongs of Howey.

The SEC’s obsession with focusing on the token, and not on the circumstances surrounding the offering as a whole, allows the SEC to sidestep a legitimate Howey analysis. It takes unconstitutional bootstrapping to a level not seen before.

This is why I said the SEC may have snatched defeat from the jaws of victory. As I point out to Judge Torres:

“Simply put, the allegations contained in the Amended Complaint are quite possibly the most overbroad far-
reaching claims ever made in an SEC enforcement action.”