During a discussion about cryptocurrency regulations, Congressman Warren Davidson recently expressed concerns about the actions of Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC). Davidson, a House Financial Services Committee member, highlighted the need for transparency and accountability within the SEC.
During the conversation with Thinking Crypto, Davidson also discussed possibly issuing a subpoena to Gary Gensler to obtain necessary documents and communications related to the SEC’s activities. He said that patience with Gensler’s leadership had worn thin, and a subpoena might be necessary to ensure transparency and cooperation.
Davidson believed that the SEC’s actions and lack of clear regulations have hindered the cryptocurrency industry’s growth. He cited fraud cases and the need for structural changes within the SEC as significant concerns.
The discussion also touched on the SEC’s previous stance on Ethereum, where a speech by former SEC official Bill Hinman was considered guidance by the industry. However, recent revelations have raised questions about the ethics and transparency of that decision.
He hopes that the recent court criticisms of the SEC’s actions in the Ripple vs. SEC case will make the SEC change its approach to regulating cryptocurrencies. He also believes that the SEC’s current method of using the Howey test as its primary guideline for determining if something is a security is too vague and that there should be clear laws specifically for digital assets. Davidson also said that having real contracts is crucial when the SEC claims something is an investment contract.
Regarding Central Bank Digital Currencies (CBDCs), Davidson argued against their implementation, suggesting that they could be used as tools for government control and coercion. He emphasized the importance of sound and strong money and expressed skepticism about the need for a U.S. CBDC.
When discussing XRP vs. SEC, the never-ending legal drama is the first thing one thinks of. There’s always some new exciting twist, development, or buzz to learn about. So, what’s the latest update? Dive in!
Ripple Pushes Back Against SEC’s Appeal
On September 1, prominent crypto exchange Ripple filed its objection to the SEC’s request for an interlocutory appeal. In their objection, Ripple defendants Brad Garlinghouse and Chris Larsen argue that the appeal is baseless, as it would require the Second Circuit to review the court’s application of law to the evidence before a final judgment has been entered.
The team later notes:
“Because the questions the SEC presents for interlocutory appeal would require the Second Circuit to review this Court’s application of the law to the evidence adduced in summary (the parties’) judgment motion(s), an interlocutory appeal (is) inappropriate.”
The SEC must request the Court to review the decision without examining the record to fulfill the conditions for an interlocutory appeal. The Ripple defense team continued to plead that an interlocutory appeal was undesirable because the Second Circuit would need to review the record.
John Deaton’s Insights: What are the Next Steps?
John Deaton, a pro-XRP lawyer representing XRP tokenholders, has outlined the steps Ripple and the SEC might take to settle. He is against the SEC’s actions and has voiced his dissent several times.
Deaton believes that if the judge in the Coinbase vs. SEC lawsuit grants Coinbase’s motion to dismiss, it could set the stage for a possible Ripple-SEC settlement before the end of the year.
“The only way Ripple and the SEC (could) settle before the end of the year is if Judge Failla grants the Coinbase motion to dismiss or partially grants it – finding token sales on an exchange in a blind bid/ask transaction do not fall under U.S. securities laws”
The SEC filed a lawsuit against Ripple, its CEO Brad Garlinghouse, and its co-founder Chris Larsen in December 2020, alleging that the company sold XRP as an unregistered security. The lawsuit has significantly impacted the crypto industry, as many exchanges have delisted XRP or restricted its trading.
Ripple Puts Diversity First!
Despite the ongoing legal challenges it faces in the United States, Ripple is committed to expanding its global reach and hiring the best talent worldwide. In an interview with Bloomberg, CEO Brad Garlinghouse announced that the company plans to hire 80% of its new staff from outside the United States this year.
This move signals that Ripple is serious about diversity and inclusion in the workplace.
Ripple to Look Beyond the USA
After suffering losses from the SEC lawsuit, Ripple wants to expand to countries with more explicit crypto regulations to avoid further disruptions to the XRP industry. The company plans to hire 80% of its new staff from outside the United States this year, focusing on countries like Singapore, Hong Kong, and Dubai.
“You see markets like we have here in Singapore, certainly even what we’re seeing in Hong Kong, the U.K.Dubai, where the governments are partnering with the industry, and you’re seeing leadership, providing clear rules and you’re seeing growth, ” Garlinghouse said. “And frankly, that’s why Ripple is hiring there, 80% of our hiring this year will be outside the United States.”
CEO Brad Garlinghouse cited these countries as examples of markets where “governments are partnering with the industry and providing clear rules.” He also criticized the SEC for creating an unfavorable crypto environment in the United States by suing major exchanges like Binance, Coinbase, and Kraken.
Garlinghouse’s comments suggest that Ripple is frustrated with the lack of regulatory clarity in the United States.
Ripple Refuses to Back Down
In a recent ruling, Judge Analisa Torres decided that most of Ripple’s XRP deals did not break securities laws. She found that sales defined as “other distributions” were acceptable and did not include an offer of unregistered securities. These included offers and trades of XRP in return for goods and services.
This ruling is seen as a victory for Ripple, as it supports the company’s argument that XRP is a virtual currency and not a security.
The SEC has requested a contemporary court ruling, allowing the case to be appealed before it reaches a final verdict. However, Ripple President Monica Long has said that the company will continue to fight the case all the way through.
“We are planning to continue to fight the case through” – Said Long.
Ripple’s Expansion Plans – 2 New Regions Unlocked!
Ripple has announced that it has opened liquidity hubs in Brazil and Australia. This is a significant expansion for Ripple’s global network, and it will give businesses in these regions easier access to digital assets.
The liquidity hubs will provide businesses a streamlined way to buy, sell, and hold digital assets. The expansion into Brazil and Australia is part of Ripple’s plan to add support for other tokens and meet its customers’ demand. Ripple has also announced new trading UI features and improved service level agreements for crypto deposit processing.
This shows that Ripple is committed to expanding its global reach and making digital assets more accessible to businesses worldwide.
An Expensive Battle: Ripple vs. SEC
Ripple has spent a massive $200 million on lawyers in its legal battle with the SEC. This eye-opening statistic reflects the disturbing reality of the high cost of litigation, as well as the life-and-death struggle between the crypto industry and the SEC, whose chairman, Gary Gensler, has adopted unclear regulations that threaten crypto firms.
The legal battle has dragged on for nearly three years, with many ups and downs.
However, the most crucial turn came in July of this year, when Ripple won a partial victory against the SEC, resulting in a significant price increase for the XRP token, which totaled approximately $0.84.
Ripple Welcomes Rahul Mukhi!
Defense lawyer and former federal prosecutor James K. Filan took to Twitter (X) to announce their new addition, Rahul Mukhi, who will represent Brad Garlinghouse in their legal battle with the SEC.
Rahul Mukhi served as an Assistant US Attorney in the Southern District of New York from 2010 to 2016. He was also honored by the Department of Justice for his outstanding service, one of the highest honors in the US Department of Justice.
Gary Gensler’s Tight-Lipped Approach Irks the Industry
SEC Chairman Gary Gensler faced a barrage of criticism from members of Congress this week over his stance on crypto and his unclear regulations over exchanges. Gensler raised the issue again by saying that people operating unauthorized accounts and migrating customer funds are “hucksters.”
In response, Rep. Stephen also questioned Gensler about the Commission’s legal fight against Ripple. Gensler was reluctant to provide specific details on the matter.
All in all, The SEC has argued that XRP is a security because it was sold to investors with the expectation of profits from the efforts of Ripple. However, Ripple has argued that XRP is a commodity and was not sold as an investment. This fight has been ongoing for over three years – and the situation is still murky. However, Ripple’s “Proper Party” in NYC suggests that the company is confident in its position and optimistic about the case’s outcome.
The outcome of the case will significantly impact the crypto industry. If Ripple wins, it could set a precedent for other cryptocurrencies and make it more difficult for the SEC to regulate them as securities. If the SEC wins, crypto companies could be more difficult to operate in the United States.
Over to you – what do you anticipate the outcome to be?
Frustration with the SEC’s leadership extending beyond the crypto market, and what recent developments have highlighted this dissatisfaction for both US senators and investors? Gary Gensler’s recent hearing has tipped this growing feud. He was grilled left and right on the SEC’s stance on major crypto projects and there is also pressure to floor the crypto bill. Ritchie Torres took a jab at SEC’s role in his 5-minute speech, read on what he has to say.
After Coinbase stood high against the SEC and threatened to go Supreme Court for delaying crypto regulations. It is gaining a streak of support from influential leaders in the U.S. Congress amid growing criticism of the Securities and Exchange Commission’s (SEC) regulatory approach. One notable exchange occurred recently when Democrat Ritchie Torres, a congressman from The Bronx, challenged Gensler during a congressional hearing.
In response, Torres expressed concerns that the SEC’s interpretation could lead to arbitrary enforcement actions. His questioning revolved around whether an investment contract required an actual contract, suggesting that the SEC’s interpretation may be overly broad.
“the term “investment contract” has been interpreted too broadly”
SEC’s Response Was Vague
Like always Gensler’s response did not offer a clear answer to Torres’s query, and he emphasized the SEC’s broad authority under existing law. However, Torres pressed further, noting that Gensler could not cite a single case in which an investment contract lacked an actual contract.
Congress Not in line With SEC Regulatory Views
In the broader space, this exchange reflects the divide between Congress and the SEC on crypto regulation. While the SEC pursues legal action against major crypto platforms like Binance and Coinbase, members of Congress from both parties are adopting more pro-crypto stances. Figures like Patrick McHenry, Tom Emmer, and now Ritchie Torres are pushing back against Gensler’s approach. The Blockchain Association, Ryan Selkis, and a16z, Paradigm also support Coinbase’s motion.
While the Senate remains less receptive to crypto-friendly policies, Coinbase and other crypto advocates are directing their attention to key figures, such as Senator Sherrod Brown, who chairs the Senate Financial Services and Housing Committee. These lobbying efforts indicate a positive trend in engaging with lawmakers to shape crypto-related legislation.
Not All Bad With Coinbase
In other news, Coinbase International Exchange has received the green light from Bermuda’s financial regulator to offer non-US retail customers the ability to trade perpetual futures. Notably, these contracts don’t have an expiration date, providing continuous trading options. This move aligns with Coinbase’s efforts to expand its global presence, marking a step toward a regulatory framework that fosters innovation in the cryptocurrency space.
Crypto venture capital firm Paradigm has accused the US Securities and Exchange Commission (SEC) of overstepping its authority and trying to “change the law while circumventing the rulemaking process” in the ongoing lawsuit against Binance. The SEC sued Binance in June, alleging that it had violated securities laws by not being registered as an exchange, broker-dealer, or clearing agency. In an amicus brief, Paradigm argued that the SEC’s stance “would upend what we know about securities law in several critical ways” and that certain assets, such as gold, silver, and fine art, were not deemed securities, so offering them for sale did not constitute a security.
Filing a brief for amicus curiae in the United States District Court, for the District of Columbia on 28th of September 2023, Circle Internet Financial LLC has now officially entered the lawsuit of Securities and Exchange Commission v. Binance Holdings Ltd. et al., as a ‘friend of the court’ to provide important information or advice regarding questions of fact or question of law.
Important Statement as by Circle an Amicus Curiae
Circle, in its brief, stated that “Payment stablecoins, on their own, do not have the essential features of an investment contract”.
“Decades of case law support the view that an asset sale — decoupled from any post-sale promises or obligations by the seller — is not sufficient to establish an investment contract”, as quoted from Circle’s stand.
Circle continues by claiming that years of case law support the idea that an asset sale that is unconnected from any obligations or responsibilities of the seller once the sale is complete is insufficient to create an investment contract. The argument assumes great importance for understanding Circle’s position on why stablecoins shouldn’t be classified as securities.
Weightage of Circle’s Statements
This argument is crucial in the context of stablecoins because if they are not considered securities, they would not fall under the regulatory oversight of the Securities and Exchange Commission (SEC).
Circle argues that stablecoins, such as their own USDC, are simply digital representations of traditional fiat currencies and do not possess the characteristics of investment contracts. By emphasizing the lack of ongoing obligations or responsibilities for the seller, Circle aims to establish that stablecoins should not be subjected to the same regulatory scrutiny as securities.
While SEC Chair Gary Gensler himself struggled to answer whether an investment contract requires a basic contract, Circle’s position as an amicus curiae and its vital advice can give a strong weightage on Binance’s chances to win.
Gensler made fun of the cryptocurrency business a few days ago and claimed that it is replete with fraud, misuse, and misbehaviour. In a similar vein, he made the same claim again in his most recent appearance before the House Committee on Financial Services.
On September 27, 2023, at 10 a.m. Eastern Standard Time, a hearing titled “Oversight of the Securities and Exchange Commission” will be webcast live. Gensler had said in the testimony that “the majority of crypto tokens are subject to the securities laws,” extending the widely criticised US SEC position on cryptocurrency regulation.
This statement by Gensler further fueled the ongoing debate surrounding the regulatory framework for cryptocurrencies. Critics argue that such a broad interpretation of securities laws could stifle innovation and hinder the growth of the crypto industry. However, proponents believe that increased regulation is necessary to protect investors from potential risks associated with fraudulent activities in the crypto market.
His Silence is Getting Louder
Additionally, he sent a prior notice of his intention to remain silent about pending legal matters, including the XRP case and the Grayscale spot ETF conversion decision.
Gensler said that there was still work to be done with the SEC authorities on the organisation’s activities so far regarding the approval of spot Bitcoin exchange-traded funds (ETFs).
This silence has left many speculating about the potential impact on the cryptocurrency market. Investors and industry experts are eager to hear Gensler’s thoughts and plans regarding the regulation of digital assets. Some believe that the lack of communication could simply be a strategic move to avoid any potential market manipulation. Regardless, the crypto community eagerly awaits further updates from the SEC chair on these critical matters.
Gensler’s Unprofessional Behavior
US Representative Ritchie Torres’ post on X where Mr. Torres captioned “Gensler struggled to answer basic questions like whether an investment contract requires a contract. His evasions are deafening and damning.”
Alderoty expressed his disappointment with the SEC Chair’s unprofessional behavior, stating that it is crucial for regulatory leaders to engage in meaningful dialogue and address concerns raised by industry professionals.
Grabbing the opportunity, Stuart Alderoty re-posted Torres’ post and criticized Gensler. “For hours Mr. Gensler smugly evaded question after question (even laughing about how rich he is) until Rep. Torres took him out with a command of the law and a touch of South Bronx street sense. Gensler didn’t know what hit him until it was too late”, he says.
The US Securities and Exchange Commission (SEC) has announced additional proceedings to determine whether proposed spot bitcoin exchange-traded funds (ETFs) from BlackRock, Invesco, Valkyrie, and Bitwise should be approved. In letters regarding the Valkyrie Bitcoin Fund, the SEC asked for input from supporters and opponents of the proposals in an apparent delay to approvals for the funds. The SEC previously put confidence in the creation of such funds on hold in August of this year.
Ron Hammond, representative of the Blockchain Association, recently discussed the upcoming crypto-related hearings and their implications on the industry. In an interview with Thinking Crypto, Hammond spoke about the upcoming trial of Sam Bankman-Fried (SPF), the founder of the FTX exchange. Hammond noted that the trial could create significant noise in DC, drawing attention to the crypto industry and potentially leading to misunderstandings.
He opened up about the importance of clarifying that SPF’s actions were not representative of the entire crypto sector, as this trial is focused on an individual’s fraudulent activities rather than the industry.
Hammond briefly discussed the ongoing investigations into Binance by the SEC and the Department of Justice (DOJ). While the SEC’s actions have been somewhat blocked recently, Hammond highlighted the looming threat of the DOJ investigation. He emphasized the need for clarity regarding the relationship between Binance US and Binance and the potential regulatory implications.
He said, “The Binance situation as a whole, there’s still that looming DOJ investigation that many folks in DC are waiting for that shoe to drop. Again, there are various rumors of why that DOJ lawsuit hasn’t dropped. There have been confirmation reports of potential sanction evasion violations and money laundering violations by Binance, of the parent company, not Binance US.”
As for upcoming hearings, Hammond mentioned that the focus would likely be on Senate Banking, which had only held one central crypto hearing thus far in the year. The Senate Banking Committee’s increased attention to AI and tech issues could lead to more discussions about cryptocurrency.
In the House, attention will be on votes related to the stablecoin bill and market structure. Taxation issues are also becoming increasingly important, with Senate Finance seeking input from the industry on how cryptocurrency should be taxed.
In a bold regulatory move, a group of GOP lawmakers recently sent SEC chair Gary Gensler a letter urging him to stop all agency rulemaking activities until he undertakes a comprehensive review.
The lawmakers raised concerns that the SEC has focused on rapid rule implementation without properly weighing stakeholder feedback or analyzing the collective economic impact. They accused the agency of formulating rules in isolation rather than holistically assessing their effects on capital markets and industry competition.
The letter didn’t mention crypto.
While the letter did not specifically mention crypto regulation, the request for a temporary rulemaking moratorium has piqued the interest of cryptocurrency stakeholders.
The crypto industry has long faced regulatory uncertainty and challenges keeping pace with hastily formed rules. Some crypto proponents hope this pause will allow the SEC to grasp the crypto markets’ intricacies fully.
In the eyes of these enthusiasts, informed SEC rulemaking could provide much-needed clarity and stability for continued crypto innovation and adoption. They believe a thoughtful, measured regulatory approach is superior to rushed rule implementation without regard for consequences.
Of course, others counter that leaving crypto largely unregulated for longer could expose markets to heightened volatility and consumer risks. They argue appropriate safeguards should remain the priority.
Regardless, the lawmakers’ bold call to halt rulemaking has opened the door for the SEC to reset and potentially reshape its regulatory course. The coming months will determine whether enhanced clarity emerges for an industry accustomed to uncertainty.
The SEC filed a lawsuit in February 2023 against Terraform Labs, saying that the company had misled investors about the soundness of its TerraUSD stablecoin. Since the case’s upcoming discovery deadline, October 13, is knocking on the door, the SEC is now more determined than ever to interrogate Kwon personally.
Kwon’s Attorney Testifies
In the September 27, 2023 filing, Kwon Do-Hyung’s lawyer requested the United States District Court, Southern District of New York, to reject the SEC’s extradition request.
Defendant’s Arguments –
The learned lawyer presents many valid arguments for why the SEC’s request to depose DoKwon in the United States shouldn’t be granted. Some of these points are –
- In Argument I, the defendant’s lawyer requests that the Ld. The court must deny SEC leave to depose Mr. Kwon in the United States simply because it is currently impossible for him to appear for a disposition in the States, provided he is in jail for four months in Montenegro. He quotes, “The law does not compel the doing of impossibilites.”
- In Argument II, the lawyer requests that the Ld. The court should also deny the SEC’s request for a preclusion order as an alternative relief.
It violates the Court’s Individual Rules 2(a) and 2(b) because the SEC never informed the defendant’s counsel about its intention to seek a preclusion order from the Court. The plaintiff’s counsel also filed the motion as an alternative relief without even being intimidated during the parties’ pre-motion call to the Chamber.
- In Argument III, the defendant’s counsel strongly argued that the Respected Court should also disregard the SEC’s irrelevant mischaracterization of evidence.
The SEC misrepresents a conversation with Mr. Kwon, claiming he intended to use Chai to create fake transactions on the Terra blockchain. The chat shows Kwon and Daniel Shin discussing linking LUNA tokens to validators and generating transactions between LUNA wallets, not fake Chai transactions. The defendant’s counsel alleges that the SEC’s motion relies on misrepresentations about irrelevant evidence to support its claim of not obtaining discovery from Kwon.
Hence, concerning the above arguments, the attorney claims that the SEC’s request shall be canceled entirely.
Today, all eyes are on Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC), who found himself in the hot seat. The US House Committee accused the SEC of stifling the crypto market and also threatened to subpoena over FTX documents.
Gary Gensler Faces Pressure From McHenry
Rep. Patrick McHenry, the head of the U.S. House Financial Services Committee, has indicated a potential move to subpoena the Securities and Exchange Commission (SEC) for documents concerning ex-FTX CEO, Sam Bankman-Fried, also known as SBF.
McHenry started by saying, “Last time you were before this Committee, I voiced my concerns regarding your reckless approach to rulemaking, lack of a capital formation agenda, crusade against the digital asset ecosystem, and unresponsiveness to Congress.”
McHenry also warned Gensler that SEC’s failure to address those concerns over the last five months have made the committee impatient. He emphasized the need for a thorough economic analysis of proposed rules and criticized the Commission for not assessing their combined impact.
McHenry pointed out bipartisan concerns over the SEC’s regulatory agenda and its lack of public input. He highlighted issues raised by members from both parties, which the SEC hasn’t addressed. McHenry also criticized Gensler for not focusing on capital formation and accused him of harming the digital asset ecosystem.
He mentioned that while Congress seeks clear rules for digital assets, Gensler’s approach has been inconsistent and often unsuccessful in court. Lastly, McHenry voiced concerns over Gensler’s lack of transparency regarding his interactions with FTX and Sam Bankman-Fried.
McHenry said, “The SEC is not above the law nor is it unique. Other financial regulators have routinely complied with congressional oversight. So let me be clear, I do not want to be the first Chairman of the Financial Services Committee to issue a subpoena to the SEC.”
SEC Faces Government Shutdown Concerns
McHenry inquired about Gensler’s stance on Bitcoin, referencing a previous discussion on Ethereum. Gensler clarified that he doesn’t view Bitcoin as a security due to its non-compliance with the Howey test. Additionally, Gensler highlighted concerns about fraudulent activities in the crypto sector, emphasizing the potential risks to investors.
During the hearing, McHenry primarily discussed digital assets and oversight. In contrast, Maxine Waters, the ranking member, voiced worries about the impact of a possible U.S. government shutdown on the SEC. Gensler indicated that if a spending agreement isn’t reached by Sept. 30, about 92-93% of the SEC staff would face furloughs.
Currently, the hearing is favoring the crypto market and four U.S. lawmakers pressed Gary to greenlight spot Bitcoin ETFs without delay. In a letter released on Tuesday, the Congress members argued that there were no valid grounds preventing the SEC from approving its first spot Bitcoin ETF.
The Ripple CLO passed his crucial opinion before the Chair of the SEC, Gary Gensler, is called to present his testimonial later today before the United Nations House of Financial Services.
Fox Business Journalist on Gensler’s Testimony
Fox Business reporter Eleanor Terrett posted a copy of Gensler’s remark on cryptocurrencies on the X platform before the testimony. The post quickly gained traction, sparking a heated debate among cryptocurrency enthusiasts and financial experts. Many were eager to hear Gensler’s stance on the future of digital currencies and how they would be regulated.
Stuart Alderoty on Gensler’s Testimony
Stuart Alderoty, the Chief Legal Officer of Ripple, expects that while Gary Gensler presents his testimonial before the House of Financial Services, any U.S. representative member present in the conference to bring forward the ruling of the U.S. District Judge Analisa Torres’s judgment on the SEC v Ripple ruling.
In a reply to Fox Business Journalist Eleanor Terret’s, Stuart Alderoty took to X and posted a series of comments.
Firstly, he comments that Gensler claiming that there exists something called a “crypto assets securities market” would be a straight lie on the face of Congressmen.
In attachment to this, he wrote a second post where he hopes that at least one of the many US Representative Members present in the testimony will present the judgment of the Court, passed by Judge Analisa Torres, in the Ripple suit dated 13/7/23. Judge Analisa Torres held that “XRP, as a digital token, is not in and of itself “a contract, transaction, or scheme” that embodies the Howey requirements of an investment contract.”
To this post of Alderoty, many verified crypto enthusiasts commented, bringing out their discontent against the US SEC’s Chair Gary Gensler.
SEC Not Abiding by The Court’s Decision
The SEC is not contesting the court’s determination that XRP is not a security but instead focusing on the issue of Ripple’s sales of XRP. The SEC wants to review whether Ripple violated securities laws by conducting these secondary sales. This distinction is crucial as it indicates that the SEC’s case against Ripple is not necessarily about XRP’s classification as a security but rather about Ripple’s alleged illegal activities related to the token.
The Securities and Exchange Commission of the U.S. has delayed the approval or disapproval of a proposed rule up to the maximum period allowed. It will pass the rule in January 2024.
Decision of the SEC
In a recent press release by the SEC, it announced that the Commission finds it appropriate to take longer time to approve or disprove a proposed regulation change that the ARK 21Shares’ spot BTC ETF would be permitted on the Cboe BZX Exchange or not.
The postponement occurred on the same day that the SEC postponed deciding on fund manager GlobalX’s proposed Bitcoin ETF. Although the regulator typically waits until a few days before any deadline to submit a delay, it’s unclear why the commission allocated more extended periods to decide the outcome of the spot Bitcoin ETF proposals weeks ahead of their upcoming deadlines in October and November.
The ultimate date set by the SEC for ARK 21Shares is 240 days after the first application, i.e., November 10, after the additional 60 days to examine the offering. The following deadline for GlobalX’s ETF is set for November 21.
Letter from U.S. Lawmakers to SEC Urging the Approval of Bitcoin EFT
Soon after the SEC’s decision to delay the process, a joint letter from the bipartisan lawmakers, a group of four U.S. Representatives called for SEC chair Gary Gensler to “immediately” approve a spot Bitcoin ETF.
The lawmakers claimed the SEC was practicing “inconsistent and discriminatory standards” in approving ETFs linked to crypto futures but not spot investment vehicles. The lawmakers argued that by not approving a spot Bitcoin ETF, the SEC hindered innovation and limited investment opportunities for American investors. They emphasized the need for regulatory clarity and urged the SEC to level the playing field by treating spot investment vehicles on par with crypto futures.
The SEC has not yet authorized any spot BTC ETFs for listing on American exchanges. Following the SEC’s defeat by Grayscale in the Court of Appeal for the District of Columbia in August, many industry insiders hypothesized that the agency would take a second look at any outstanding ETF applications.
The following deadlines for spot crypto ETF applications are set for October by seven prominent companies: BlackRock, WisdomTree, Invesco Galaxy, Valkyrie, Bitwise, VanEck, and Fidelity. These deadlines may be postponed or extended by the SEC until March.
This approach by the SEC has sparked speculation among market participants about the potential reasons why the decision-making process has been extended unnaturally. Some experts suggest that the commission may take extra time to thoroughly evaluate the potential risks and benefits of approving a Bitcoin ETF, considering its impact on the broader financial market. Others believe the SEC’s decision could be influenced by external factors such as ongoing regulatory developments or market volatility surrounding cryptocurrencies.
The post SEC Delays Decision on ARK 21 Shares Bitcoin ETF to Next Year! appeared first on Coinpedia Fintech News
The US SEC has put forth a decision to postpone the approval of the ARK 21 Shares Bitcoin ETF proposal until next year, with a new deadline of January 10. This decision follows the postponement of the Global X Bitcoin Trust’s proposal, which has been delayed until November 21. The move suggests that further delays on spot bitcoin funds could be on the horizon. The SEC’s actions have caused uncertainty among both investors and companies as they wait for the SEC’s approval to invest in Bitcoin ETFs. Some experts believe that the SEC’s hesitation may be due to concerns over the nature of the cryptocurrency market and Bitcoin’s volatility.
The Congress of The United States has released an official letter dated 26 September 2023 addressing the Chair of the Securities and Exchange Commission, Gary Gensler, urging him to immediately approve Bitcoin EFT.
What the Letter States
The letter mentions the order passed in the case of Grayscale Invs., LLC v. SEC by the United States Court of Appeals for the District of Columbia. In the order, the Court of Appeal held that Grayscale’s proposed Bitcoin ETP is “materially similar, across relevant regulatory factors, to the approved Bitcoin futures ETPs”.
It also mentions how the Circuit Court has supported Grayscale’s claims that the SEC’s decision to reject Grayscale’s application to convert Grayscale Bitcoin Trust (GBTC) to spot Bitcoin ETP was in violation of the Administrative Procedures Act.
Urge to Approve
As a result, Representatives Mike Flood, Tom Emmer, Ritchie Torres, and Wiley Nickel wrote an ensembled letter to Gensler. Their claim is that a regulated spot Bitcoin ETF would provide more investor protection. The change would simplify and safeguard Bitcoin access. The letter goes on to directly state that there are no valid reasons for which the SEC has been delaying and denying the approval is discriminatory and inconsistent.
Furthermore, the SEC’s hesitancy appears increasingly contradictory with major businesses like BlackRock and Fidelity in the queue for clearances. Furthermore, this week’s House Financial Services Committee hearing gives an excellent opportunity for these concerns to be aired directly to Gensler.
So far, Ripple has made some fantastic moves in the ongoing XRP Lawsuit; today, Ripple Labs CEO Brad Garlinghouse’s new defense attorney filed a notice of appearance in court. A new Attorney? Yes, you heard it right: we think this is a strategic move by the firm at this crucial juncture.
Though XRP’s status of Securities will remain the same for the next two years, many expect that the executives will get minimal punishment for selling “unregistered Securities.” Okay, so is it that simple, or are there complexities? Let’s face it.
Per the recent court filing, Rahul Mukhi, from the law firm Cleary Gottlieb Steen & Hamilton LLP, will represent Brad Garlinghouse exclusively. This is significant because Garlinghouse and Ripple Labs founder Chris Larsen are involved in the lawsuit, yet Mukhi is designated explicitly for Garlinghouse. This move has sparked curiosity in the XRP community about the implications of this unique legal representation.
Since the XRP case is complex and many defendants are involved, they need an experienced hand to join the ends with the regulators.
New Lawyer: Trump Card to Stop SEC Interlocutory Appeal?
Ripple’s decision to bring in a new attorney at this stage is unexpected. It raises questions about their strategy. Are they confident of winning or considering a settlement with the SEC? The new attorney, Rahul Mukhi, is highly regarded for his expertise in complex legal matters and investigations. Some experts believe Garlinghouse and Larsen might be facing unnecessary lawsuits. It could significantly strengthen his case with Mukhi on Garlinghouse’s defense team.
The two lawyers representing SEC, Richard Best and Robert Moye, exited the XRP lawsuit last month, creating a notable gap in the representation. The departure is seen as a weak case from the SEC against Ripple. However, Ripple clarified that the exit of these lawyers will not affect their stance on XRP’s status. This indicates the company’s confidence in the ongoing legal proceedings.
So… What Next?
Ripple vs. SEC is far from over, as a federal judge, Analisa Torres, has ruled that the case will proceed to trial without definitively resolving all issues. A recent decision determined that Ripple’s token is classified as a security when sold to institutional investors but not to the general public. Judge Torres’ ruling had a mixed outcome, as she concurred with the SEC that direct sales of XRP to institutional investors were unlawful securities sales.
Hence, SEC’s case against Brad Garlinghouse and Chris Larsen may be dropped because Judge Analisa Torres ruled that trading XRP on secondary markets isn’t considered securities. If this happens, the crypto will see a new day in the crypto history.
The post SEC Opposes Celsius Plan for Coinbase in Bankruptcy Restructuring! appeared first on Coinpedia Fintech News
The Securities and Exchange Commission has voiced its opposition to crypto firm Celsius Network’s proposal to distribute digital assets to customers through Coinbase as part of its reorganization plan. The firm filed for bankruptcy more than a year ago and plans to seek bankruptcy court approval for its restructuring plan in the coming weeks. The SEC filed court papers alleging that Coinbase’s involvement in the proposed plan of reorganization, which includes brokerage and master trading services, could prompt litigation as the regulator’s lawsuit against Coinbase is still ongoing.
Ethereum, known for its innovation and success, faces doubt as a former advisor, Steven Nerayoff, recently made allegations about its early days. His claims challenge Ethereum’s integrity and have caused conflicts within the crypto community, raising questions about its history. The unfolding situation continues to fuel discussions and investigations within the cryptocurrency community.
In a surprising turn, Steven Nerayoff has expressed his admiration for the XRP community.
He commended their unity and dedication, stating, “Thank you. I’m astonished at how you’ve come together to fight, and ‘Army’ doesn’t even do you justice. I’ve been in more communities than most & never seen such a dedicated yet civil one like XRP. Most are toxic.”
Nerayoff acknowledged the challenges faced by the community in recent years and stressed the importance of not allowing bitterness to change their character. He highlighted the community’s ability to maintain integrity while navigating a system that may be biased against them.
He wrote, “They have put us all through difficulties these past few years. I remind myself not to allow them to get me bitter and change who I am. You’ve done the same it seems. We win without compromising our ethics even if the rules are skewed in their favor. Thats how I got my case dismissed and kept my integrity. Wasn’t easy but so worth it when you beat them without stooping to their level.”
This news came to light when XRP lawyer John Deaton made startling revelations. Deaton claims to have seen some of the documents held by Steven Nerayoff, which point to inconsistencies during Ethereum’s initial coin offering (ICO) in 2014. Previously, Steven Nerayoff and Deaton had made claims about possessing documents that expose wrongdoing within the U.S. Securities and Exchange Commission (SEC) and during Ethereum’s ICO.
Former SEC Official John Reed Stark Raises Concerns About FTX Trial and SEC’s Approach to Crypto Cases
In a recent post on X, the former US Securities and Exchange Commission (SEC) official, John Reed Stark, expressed his concern and utter confusion in adding Sam Bankman-Fired parents as criminal conspirators in the FTX trial, not as defendants of Bankman-Fried.
John Reed Stark has an extensive experience in the field of law. Having worked for almost 20 years in the US SEC Division of Enforcement, including 11 honorable years as the Chief of SEC’s Office of Internet Enforcement, Mr. Stark has expressed his concerns regarding the numerous SEC-crypto-related lawsuits.
What is His Main Concern?
Start his post on X voicing his concern about why Sam Bankman-Fried’s parents have not been filed as defendants in the FTX trial case. He says that SBF’s parents should be at least named as ‘relief defendants’, implying that he thinks positively of Sam’s parents and that they were not involved in the FTC fraud case.
Even recently, John Deaton expressed his concern on why and how the SEC has charged Sam Bankman-Fried’s parents as co-conspirators in the FTX case.
Stark’s Concern Regarding US DOJ, SEC
In his X post, John Reed Stark continued to express his growing bewilderment over the present working of the US Department of Justice and the SEC. He particularly mentions the “extraordinary dearth” of crypto-related criminal cases, including nearly 200 crypto-enforcement actions the SEC took.
The number of cases and their frequency is “mind-boggling,” making law enforcement actions against crypto a piece of common day-to-day news.
Mr. Stark also mentions the critical comment made by the CEO of Gemini Cryptocurrency Exchange – Tyler Winklevoss. After the SEC charged Gemini and Genesis with a $900 million fund crisis, the Winklevoss twins took to the internet and called SEC charges “super lame” and compared them to “manufactured parking tickets.”
Stark also commented on the recent SEC charges on Coinbase and Binance.
He says, “Coinbase and Binance have touted their SEC charges like badges of honor (laughing all the way to the bank)”.
Need for Action
The former SEC official clarifies the stark reality that the SEC is “merely a civil enforcement agency.” The enforcement prosecutions against crypto led by the SEC have become so common that unless and until the crypto-grifters are faced with serious prosecution by the US Department of Justice, that is, prison time, they will continue to treat SEC allegations and liability charges as “another liability item on their balance sheets.”
He concludes his post with a serious concernful one-liner – “Wake up US DOJ, we need you buddy.”
Binance.US has filed a motion to respond to Magistrate Judge Zia M. Faruqui’s order concerning the U.S. Securities and Exchange Commission’s (SEC) motion to compel. The motion was filed on September 22 by BAM Management US Holdings and BAM Trading Services, the entities behind Binance.US. This comes as a strategic countermove against the SEC’s claim that Binance.US has failed to cooperate in accordance with an earlier agreed consent order.
The essence of this legal maneuver is to buy Binance.US more time to respond to the SEC’s allegations properly. An approval would give them the much-needed time against the regulator’s motion to compel them to release specific documents.
Binance.US Claims SEC Overreach
Binance Holdings Limited and CEO Changpeng “CZ” Zhao have been vocal that the SEC lacks the authority to make these claims. They argue that the allegations are based on unclear premises and that the SEC has failed to prove that the crypto assets are indeed securities.
While the courtroom battles unfold, Binance.US’s trading volume has been severely impacted. The exchange saw its trading volume drop from $5 billion to $40 million amid this regulatory pressure.
- October 23, 2023: Deadline for Binance to respond to the CFTC’s September 22 filing.
- November 7, 2023: The SEC will reply to Binance’s plea for dismissal.
Initially, the CFTC filed a lawsuit against Binance in March. This case alleges that Binance offered unregistered derivatives products and failed to implement a robust KYC or AML program. In parallel, the SEC filed its lawsuit, focusing on Binance’s offering of investment products like “BNB Vault” and “Simple Earn” without proper registration.
The Department of Justice (DoJ) is also circling, accusing Binance of allowing Russian customers to access its platform, violating U.S. sanctions tied to Russia’s actions in Ukraine.
If Binance succeeds in its legal battles, it might pave the way for a more accommodating regulatory environment. However, a loss on either front could signify a domino effect, opening the floodgates for further regulatory action against other crypto platforms.
- Ripple’s Legal Saga Sparks New Settlement Rumors
- XRP Army Shares Thoughts on Possible Settlement
- Pro-XRP Lawyer John Deaton’s Poll Reveals Community Sentiment
The ongoing legal dispute between Ripple and the U.S. Securities and Exchange Commission (SEC) has been a rough journey for the cryptocurrency community. However, recent rumours regarding a settlement have added a new layer of intrigue to the saga.
Ripple’s Legal Saga Sparks New Settlement Rumors
On X platforms, members of the XRP community are actively sharing their thoughts and opinions regarding the potential for a settlement. While some maintain a cautious yet hopeful outlook, others adopt a more sceptical position.
Adding to the buzz in the rumour mill, a prominent member of the XRP community known as “XRP Captain” recently sparked conversations and speculations with their mention of a potential settlement.
It’s worth noting that Ripple has planned a special event called the “Proper Party” to celebrate its partial victory over the SEC. This event is scheduled for September 29, 2023, in New York.
“XRP Captain” suggests that a settlement might happen about a week before the Proper Party, which would place a potential agreement date around September 22.
XRP Army Shares Thoughts on Possible Settlement Rumors
Furthermore, the rumour has prompted responses from the “XRP Army,” who wasted no time in reacting to this unexpected twist.
One XRP enthusiast, with the username @zayatos, humorously mentioned that if the rumor were true, they would host their own “proper party” at home.
In contrast, another XRP enthusiast with the username @Napoguizmo dismissed the news as mere rumours, stating, “Rumors = bla bla bla… nothing.” However, many other members of the XRP community have raised doubts regarding the validity of this rumor.
It’s worth noting that this isn’t the first time rumors of a settlement have emerged. Since the SEC v. Ripple lawsuit began, several rumors about a potential resolution have circulated. However, none of these rumours has proven accurate, as the legal battle remains.
Pro-XRP Lawyer John Deaton’s Poll Reveals Community Sentiment
Experts are closely monitoring the potential effects, both within and beyond the XRP community, of a settlement.
In the meantime, a well-known lawyer specializing in cryptocurrencies and a supporter of XRP, named John Deaton, took it upon himself to assess the sentiment within the XRP community.
To gather insights, he conducted a Twitter poll asking his followers to share their predictions on how they believe the SEC v. Ripple legal battle will culminate by 2023.
The poll has garnered significant attention, with nearly 15,000 votes cast and counting. There has not been any official confirmation or announcement regarding a settlement at this time.
The First Circuit Court of Appeals in Boston has ordered LBRY, the blockchain-based content platform, mandating the submission of its brief no later than November 1, 2023. This development marks a significant chapter in the legal dispute between LBRY and the Securities and Exchange Commission (SEC).
A Costly Clash
Initially, the SEC imposed a substantial penalty of $22 million on LBRY, accusing the company of amassing this sum through the sale of its native LBRY Credit tokens (LBC). However, the SEC later revised the penalty to a more “manageable” $111,614, possibly acknowledging LBRY’s financial challenges.
LBRY cried foul from the get-go. Their argument centred around the notion that the SEC’s initial figure was not just wrong but “vastly” inflated. They argued that the penalty didn’t consider their legitimate operational costs. In December 2022, the possibility of shutting down loomed over LBRY, primarily due to these legal pressures.
LBRY Fights Back
Many expected LBRY to wind down operations. However, in a surprising pivot, LBRY has filed a notice of appeal this September. Their primary aim? To challenge the federal judge’s ruling that favored the SEC.
Jeremy Kauffman, the CEO of LBRY, remarked that their appeal emanates from a belief that the SEC’s decision was not only “unjust” but also “incorrect.” Kauffman is concerned that the SEC will use this ruling as a cudgel against the broader cryptocurrency sector.
Here’s Why You Should Care
This latest move by LBRY aligns with recent victories that other cryptocurrency companies like Ripple and Grayscale have chalked up against federal regulators. In 2022, attorney John Deaton, who has also represented XRP holders in the Ripple-SEC lawsuit, joined the LBRY battle as an Amicus Curiae.
Naomi Brockwell, a tech journalist interested in LBRY, also joined the legal conversation. She cited earnings as LBC tokens but clarified that she hadn’t cashed out her holdings.
In sum, as LBRY gears up to submit its brief by the designated deadline, both supporters and skeptics of the cryptocurrency ecosystem are hoping that the case will undoubtedly set a new precedent in the industry. Could this finally lead to SEC leaving crypto alone? Only time can really tell.
Meanwhile, stay tuned to Coinpedia for all updates!
In the latest twist to the ongoing SEC vs. Binance case, Australian lawyer Bill Morgan took to Twitter, highlighting the importance of the SEC’s recent move to certify an interlocutory appeal.
Responding to public comments on social media, Bill Morgan clarified his view that the SEC may use the interlocutory appeal to “bolster its argument that the issue she [Judge Torres] decided is arising in other matters.” He suggests that the SEC’s motive behind the interlocutory appeal is to emphasize that Judge Torres’ rulings have broader implications that could significantly impact other cases.
Why the Interlocutory Appeal Matters Even More
Morgan’s comments gain added weight when considering Judge Torres’ earlier ruling in the SEC vs. Ripple Labs case. Torres held that ‘blind bid/ask transactions’ do not fall under the definition of “investment contracts.” If Torres’ interpretation carries over into the Binance case, the SEC’s interlocutory appeal would take on even greater significance. This is because it would challenge the Binance ruling and potentially the foundational logic behind the SEC’s approach to crypto regulation.
Ripple’s Firm Stance Against SEC’s Appeal
Simultaneously, Ripple Labs has strongly opposed the SEC’s latest attempt to certify an interlocutory appeal in its own ongoing legal battle. This dual resistance from both Ripple and Binance adds an intriguing dynamic to how interlocutory appeals could shape individual cases and set new precedents for cryptocurrency regulation.
The stakes of the interlocutory appeal are high. Should Judge Torres grant it, the ripple effect could be far-reaching. Morgan’s reply hints that Torres’ decision may be a key consideration for the SEC, even as they contend with differing opinions from trial court judges across various circuits.
The Crypto Community Waits
Bill Morgan’s insights into the SEC’s push for an interlocutory appeal have spotlighted an often-overlooked but critical aspect of crypto litigation. As both the Binance and Ripple cases progress, the focus is shifting toward how such appeals could influence individual cases and the broader regulatory framework governing cryptocurrencies.
The complex web of legal battles involving the U.S. Securities and Exchange Commission (SEC) with Ripple Labs, Coinbase, and Binance have become focal points for the crypto community. In a heated debate, Marc Fagel and Deaton opened up on how SEC will be in a bad position if they are denied the interlocutory appeal. The possible outcome will shock you; read on.
Marc Fagel opens Up on SEC’s Stance on Interlocutory Appeal.
The former SEC official, Marc Fagel, shared insights into why the SEC is keen on appealing the Ripple ruling. The experienced former official noted two important facts; the first is obvious as the decision greatly threatens the SEC’s broader regulatory program against exchanges.
Second, he noted that if the concerns were only limited to issuers of securities-related assets and tokens, the SEC might have pursued a different strategy. However, the nature of the ruling necessitated an appeal. Looking at the SEC’s position and Gary Gensler’s hearing going in parallel, this appeal is an ego war for the SEC.
Binance Pushes for Dismissal
Binance quickly took advantage of the situation; pro-xrp lawyer Bill Morgan reported that Binance had taken a strategic step in its legal battle with the SEC. Based on Ripple’s summary judgment, Binance filed a motion to dismiss the SEC’s case. Moreover, Binance’s legal team cited the Ripple ruling as a precedent, emphasizing that Ripple’s sales of XRP were characterized as blind bid/ask transactions, not investment contracts.
Hence, it is quite evident how important the Ripple ruling is for Binance. Attorney Morgan highlighted the significance of the Ripple ruling for other crypto-related companies. He questioned whether Binance’s recent argument played a role in the SEC’s decision to pursue an interlocutory appeal. Fagel, an expert in securities litigation, confirmed this view, indicating that the Ripple ruling challenges the SEC’s overarching regulatory framework for exchanges.
SEC’s Parallel Concerns
To be precise, the SEC echoes the same concerns and implications of the Ripple ruling. In its pursuit of an interlocutory appeal, the SEC focuses that the court’s decision on programmatic sales could have a far-reaching impact on its pending litigations against Coinbase and Binance.
John Deaton’s Has Some Strong Intuition
All eyes are on the court’s ruling on the SEC’s pending request for an interlocutory appeal. Speculation abounds within the crypto space about the likely outcome. John Deaton, founder of Crypto-Law.US, anticipates that the court will deny the SEC’s request, potentially leading the regulator to file a full appeal next year.
Meanwhile, XRP’s market performance has demonstrated relative stability amid these legal proceedings. The digital asset trades slightly above the $0.50 support level, with a 24-hour trading range between $0.5130 and $0.4913. The market appears to be closely monitoring developments while maintaining a cautious stance.
Binance, the leading cryptocurrency exchange, is harnessing the momentum from Ripple’s recent victory in court. They strive to have their own case with the U.S. Securities and Exchange Commission (SEC) thrown out. The crypto giant’s recent motion seeks to benefit from the legal precedent set by Ripple’s win, wherein the court ruled that the latter’s XRP sales on secondary markets didn’t classify as securities transactions.
Ripple’s Triumph: A New Defense Blueprint
In a recent court filing, Binance spotlighted Ripple’s recent court success, highlighting the ruling from Judge Torres. According to Binance, this case is the sole judicial instance that mirrors the transactions that purportedly took place on Binance’s U.S. platform. The significant conclusion in the Ripple saga was that sales of XRP in secondary markets – such as those through blind bid or ask trades – weren’t investment contracts.
A Question of Precedence
In challenging the charges, Binance underscores that the SEC’s attempt to draw parallels with previous initial coin offerings (ICOs) doesn’t hold water. They stress that there have been numerous instances where courts remained undecided on whether tokens sold by traders were actually securities transactions.
This critical question is at the heart of Binance’s argument. By leaning on the Ripple case’s outcome, Binance pushes the narrative that cryptocurrency trades on its platform shouldn’t be labeled as securities transactions by the SEC.
This perspective is fortified by a part of Binance’s legal memorandum, which essentially states that, like in the Ripple scenario, there was no defining relationship between trading parties that could morph a simple digital asset sale into an investment contract sale.
Binance’s latest attempt to challenge the SEC illustrates how significant court rulings can shape subsequent legal battles in our industry. As Ripple’s mini victory casts its shadow, many eyes will be on this case to see if Binance can achieve its favorable outcome.
In a recent interview held by Bloomberg, SEC chairperson Gary Gensler was found to disrespect the decision of the Court by advocating his view of applying security laws to cryptocurrencies. Stuart Alderoty, the Chief Legal Officer of Ripple, condemned his statements in a tweet.
Ripple has been fighting consistently to bring legislative clarity to cryptocurrency regulation. However, Gary Gensler, although a member of a 5-man committee, personally believes that applying security laws on cryptocurrency will protect the interest of the investing public.
Gensler says in his interview, “Investors still benefit from disclosure and get to choose based on that disclosure. Investors benefit from laws against fraud and manipulation and other conflicts in the market.”
A Fierce Clash of Opinions Broke Out Soon After
John Deaton, XRP lawyer, the public representative of 75,000 XRP holders, took to X and alleged SEC fraud and public manipulation. He states what investors need protection from is the SEC’s anti-crypto regulations.
According to Steven Nerayoff, an early Ethereum consultant, a $19.2 trillion loss in US household wealth occurred during the housing crisis owing to fraud and manipulation by regulated institutions.
Federal courts in the Grayscale trial branded the US SEC’s assertions “arbitrary and capricious,” while Judge Netburn in the Ripple trial described the SEC’s conflicting viewpoints as “hypocrisy.”
On September 2, XRP lawyer John E. Deaton stated that federal judges and both chambers of the US Congress are noting the hypocrisy of the US SEC. He finds it noteworthy that Coinbase chief legal officer Paul Grewal used the word “hypocrisy” in his remarks on Ripple’s filing of an interlocutory appeal with the SEC.
The SEC incorrectly argued with the “question of law” threshold for interlocutory appeal and neglected to confront its authority. According to Stuart Alderoty, the SEC’s interlocutory appeal filing is disingenuous and has no effect.
In the legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) regarding the cryptocurrency XRP, the SEC’s recent move has raised questions among the crypto community. They are now seeking an interlocutory appeal in the XRP Lawsuit.
Marc Fagel Reveals SEC’s Ripple Ruling Strategy for Crypto Exchange Litigations
Former SEC official Marc Fagel has recently emerged to provide insights into the main motive behind the SEC’s pursuit of permission for an interlocutory appeal.
Eventually, this interlocutory appeal came of Binance, a prominent cryptocurrency exchange, who is filing a motion in an attempt to dismiss the SEC’s appeal request. Binance used the Ripple ruling as a significant legal precedent in its argument.
Drawing from his experience in securities litigation, Fagel uncovers the SEC’s pursuit of this appeal as a calculated response to the potential impact of the Ripple ruling. He observes that if the ruling had only applied to issuers of securities-related assets and tokens, the SEC might have chosen a different course.
Nevertheless, considering the broad-reaching impact of the Ripple ruling on ongoing litigations involving crypto exchanges like Coinbase and Binance, the SEC deemed it necessary to pursue this interlocutory appeal.
SEC’s Worries, as Ripple Ruling’s Weight on Ongoing Legal Actions
The SEC has expressed its concerns to the court, emphasizing the potential impact of programmatic sales rulings on their ongoing legal actions. Currently, the court is evaluating the SEC’s request for certification of an interlocutory appeal.
Binance is taking the SEC’s pursuit seriously and has responded by submitting legal documents to support its motion for dismissing the SEC’s case. The legal team representing Binance refers to the Ripple ruling as a precedent that could potentially challenge the SEC’s broader objectives concerning cryptocurrency exchanges.
Attorney Morgan, representing Binance, emphasizes that the SEC foresaw other crypto-related companies like Coinbase potentially using the Ripple ruling as a foundation for their defense strategies. Meanwhile, the SEC’s moves in the XRP lawsuit go beyond the courtroom, with broader implications in mind.
Australian lawyer Bill Morgan has taken to Twitter to shed light on a critical aspect of the ongoing SEC vs. Binance legal battle. His insights suggest a potential challenge to the SEC’s regulatory actions against Binance and other cryptocurrency platforms.
A Closer Look at the Legal Grounds
Morgan’s tweet zeroes in on the defendants involved in the case, namely, BAM Trading Services Inc. and BAM Management US Holdings Inc. He underscores the importance of a previous court ruling that Ripple Labs Inc. was a part of. Specifically, Morgan highlights the court’s stance on “blind/bid type transactions on secondary exchanges.” This stance has particular relevance in the realm of digital asset trading, particularly on platforms like Binance.
To break it down in simpler terms, these transactions refer to scenarios where buyers and sellers on platforms like Binance don’t have a direct relationship. Additionally, the purchase of assets is not contingent on the seller’s promise of future profits.
Why Does the SEC v Ripple Case Matter?
Morgan points out that in the SEC vs. Ripple Labs case, Judge Torres determined that ‘blind bid/ask transactions’ did not meet the definition of “investment contracts.” This decision could have far-reaching implications for the ongoing SEC vs. Binance case, where BAM Trading Services Inc. and BAM Management US Holdings Inc. are co-defendants.
If the court upholds Judge Torres’ interpretation, the SEC may struggle to argue that Binance’s digital asset sales qualify as investment contracts. This potential shift could significantly impact the case’s landscape and limit the SEC’s ability to regulate these platforms as extensively as it desires.
Binance’s defense team, in their Memorandum, has raised several noteworthy points
- Broad and Flawed SEC Definition: The SEC’s definition of an ‘investment contract’ is overly broad and flawed.
- Unique Nature of ICO Cases: Initial Coin Offering (ICO) cases should not be a universal standard for classifying digital assets as securities.
- Expansive Application of Investment Contract Theory: The SEC’s application of the investment contract theory is too expansive, creating uncertainty for industry participants.
- Lack of Adequate Evidence: The SEC has not adequately demonstrated that BAM’s staking service qualifies as an unregistered security.
The Ripple Effect in Action!
Should the court align with the defendants’ arguments and Judge Torres’ interpretation, the resulting ruling could establish a precedent with far-reaching consequences for Binance and other cryptocurrency platforms currently under regulatory scrutiny. This precedent might lead to a clearer understanding of digital assets and could potentially restrain sweeping regulatory measures.
Once a hub of million-dollar transactions, the Non-fungible Token (NFT) marketplace now grapples with a grim revelation. A recent study scrutinizing 73,257 NFT collections has unveiled that 95% of them currently hold no value in cryptocurrency, specifically ether. This revelation follows less than two years after a colossal surge in the NFT market.
Former SEC official John Reed Stark shed light on this startling revelation. Among the collections scrutinized, a staggering 69,795 of them boast a market capitalization of zero ether, effectively rendering them virtually worthless. Even within the upper echelons of NFT collections, the prevailing price for an NFT has plummeted to a mere $5-$10.
Ironically, a select cadre of venture capitalists and Wall Street investors reaped substantial profits by championing NFTs as instruments of decentralization, financial inclusivity, and instantaneous wealth. However, this dream has metamorphosed for most retail investors into a financial nightmare characterized by substantial losses.
Stark’s critique extends beyond NFTs; it encompasses the entire cryptocurrency industry. He contends that crypto is not a secure “investment” because it lacks regulations, transparency, and investor safeguards. He further asserts that the industry is marred by deceit and fraud, perpetuating an uneven playing field. While these assertions may appear stringent, they serve as a stark reminder that the crypto sector must address its issues to gain trust among all stakeholders.
Stark contends that crypto falls short in multiple areas. It doesn’t function as a reliable “investment” due to its dearth of rules, safety mechanisms, and susceptibility to fraudulent activities. Additionally, its volatility, exorbitant fees, and inherent risk undermine its viability as a “currency.”
Furthermore, crypto’s inability to maintain stable value prevents it from serving as a “store of value,” questioning its intrinsic worth. Moreover, it poses risks for individuals without access to traditional banking systems, potentially making them susceptible to manipulation. Lastly, the absence of regulations and protective measures casts doubts on its suitability as a “safe haven.” While traditional banks may have their share of issues, crypto doesn’t appear to provide the panacea.
In a recent statement, attorney John Deaton expressed his strong disagreement with remarks made by Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), regarding the cryptocurrency space. Deaton’s response comes after Gensler characterized the crypto industry as rife with “hucksters” and non-compliance.
Gensler’s comments, made during a public address, drew criticism from Deaton, who urged observers to pay close attention to the SEC Chair’s response to a specific question.
Deaton said that when Gensler mentioned “Any Court,” he referred to the highest judicial authority in the United States—the Supreme Court. Deaton’s interpretation suggests that Gensler may be insinuating that the SEC believes it is above the law.
He added, “Let me introduce everyone to a real-life example of a megalomaniac: @GaryGensler.”
Deaton’s remarks shed light on a growing sentiment within the cryptocurrency community, where concerns about regulatory overreach have increased. Additionally, Attorney Bill Morgan has chimed in on Gensler’s remarks.
Morgan shared his thoughts, saying that Gensler’s words appeared to show a strong desire for the SEC to win the ongoing Ripple case. However, Morgan pointed out that Gensler’s wish didn’t come true because Ripple achieved a positive outcome in a significant part of the case.
He wrote, “He means he wishes the SEC won the part of the Ripple case that matters but they didn’t and he hopes the part Ripple won gets reversed on appeal sooner than later so the SEC can have its own (im)Proper Party in NY.”
Morgan hoped that any favorable ruling for Ripple wouldn’t go uncontested. He suggested that the SEC might try to overturn the decision through an appeal process. In Morgan’s opinion, this would allow the SEC to advance its own interests, particularly in what he called an “improper party” context in New York.