In a new turn of events, a pair of decade-old legal memos of Ripple Labs Inc. that suggested the crypto firm against selling XRP tokens might be a deal-breaker to the ongoing tussle between SEC and Ripple.
The court filings which were made public on Friday showed that in a February 2012 memo, Perkins Coie LLP attorneys advised the firm not to sell the XRP coins, as various conditions could subject them to being regulated as securities or commodities. Another memo by the same firm, dated October 2021, suggested that XRP may not be considered to be a security under federal law, and warned them of the consequences.
The prediction came true as eight years after, the SEC filed a lawsuit against Ripple, along with co-founder Christian Larsen and Chief Executive Officer Bradley Garlinghouse. In the complaint, the financial watchdog alleged that the two execs raised over $1.3 billion by selling the unregistered XRP tokens.
SEC also claimed that through the illegal sale the duo netted profits to the tune of nearly $600 million. The new developments invoked a mixed response from various legal experts.
According to Bloomberg Intelligence Senior Litigation Analyst Elliott Stein, the case would define SEC’s regulatory authority over crypto assets. Ripple General Counsel Stu Alderoty said the company is pleased the 2012 memos are now public.
The documents show a ‘compelling’ legal analysis that Ripple received in 2012 that XRP is not a security. The fact that it sought such advice in 2012 should be applauded.
So, what’s next for Ripple?
One of the key elements of Ripple’s defense has been that it does not have first-hand knowledge of XRP token could be categorized as a security. The arguments further added that SEC should have issued notice to the firm detailing its intentions before starting the legal proceedings. By not doing so, the agency denied Ripple what is known as fair notice.
But the above argument would lose steam if it turns out that the firm knew it was possible the SEC would take up the issue or that Ripple’s executives deliberately ignored their lawyers’ relevant concerns ahead of launching the XRP token.
Whatever may be the outcome, the litigation has demonstrated that a well-funded crypto company can put up a strong show against the top agency and would serve as an example for other crypto firms in their fights against SEC.