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SEC vs Ripple case headed for a no-win situation after the latest legal update

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The SEC vs Ripple tussle has witnessed several twists and turns and the latest developments seem to be confirming that. Court documents filed on 11 March revealed that the presiding judge over the highly-anticipated case Analisa Torres denied SEC’s motion to shoot down the Fair Notice defense.

The latest ruling comes after a previous judgment that ruled in favor of Ripple Lab. In early February, the court delivered a ruling in favor of unsealing two legal opinions. The decision boosted Ripple’s defense and argument that the SEC failed to notify the former of a possible violation of SEC laws.

In response, General counsel for Ripple Lab, Stuart Alderoty tweeted saying,

The latest court ruling ties in with the two legal opinions that demonstrated Ripple Lab’s efforts, to remain within the boundaries of U.S laws and, more importantly, to address any concerns vis-à-vis the classification of digital assets.

However soon after that, things took a new turn when separate court filings on the same day showed the court dismissing Ripple executives’ plea seeking to put an end to the SEC lawsuit filed against them.

Court Rulings denied Ripple’s twin motions against SEC

In a setback for the defendants, Torres, judge for the United States District Court for the Southern District of New York, has denied CEO Brad Garlinghouse’s and co-founder Chris Larsen’s twin motions to dismiss the lawsuit that was brought against them by the U.S. Securities and Exchange Commission in December 2020.

The motions were filed by the two top executives last April.

The court finds that the agency has “plausibly” alleged that Garlinghouse and Larsen carelessly disregarded the facts “that allegedly made XRP amount to the unregistered sale of securities.” The SEC has also “plausibly shown” that both of the defendants made domestic offers of the XRP token. Moreover, the court rejected the claim that their sales were predominately foreign. 

Alderoty has previously commented on the decision to strike down the SEC’s motion, claiming that there’s a “serious question” whether the agency whether provided the company with fair notice. Interestingly Garlinghouse also took to Twitter to term the “fair notice” ruling as a “huge win” while making no comments on his failed motion to dismiss the lawsuit.     

SEC Charges Siblings Over $124 Million Crypto Scam

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The Securities and Exchange Commission (SEC) has accused John and JonAtina (Tina) Barksdale over an alleged crypto scam. Two unregistered securities offerings involving a digital token named “Ormeus Coin” led to more than $124 million in losses for thousands of retail investors.

According to the SEC’s lawsuit, from June 2017 until the present, the Barksdales marketed and sold Ormeus Coin to investors on crypto trading platforms.

In addition, from June 2017 to April 2018, through a multi-level marketing enterprise named Ormeus Global, the Barksdales advertised and sold subscription packages that included Ormeus Coin and an investment in a crypto trading program.

Siblings held roadshows to advertise their scam

As stated, to market the offerings, John Barksdale organized roadshows across the world. At the same time, he and his sister, Tina, directed the development of social media postings, YouTube videos, news releases, and other promotional materials.

According to the lawsuit, the Barksdales arranged for a public website to display a wallet of an unaffiliated third party to maintain the deception that Ormeus Coin was successfully mining crypto.

As of November 2021, the wallet had more than $190 million in assets. Despite the fact that the Ormeus wallets were valued at less than $500,000. According to the lawsuit, the Barksdales are also accused of manipulating Ormeus Coin’s price and misusing millions of dollars in investor monies for personal needs.

Melissa Hodgman, Associate Director in the SEC’s Division of Enforcement said, “We allege that the Barksdales acted as modern-day snake-oil salesmen, using social media, promotional websites, and in-person roadshows to mislead retail investors for their own personal benefit.”

“We will continue to vigorously pursue persons who sell securities in schemes to defraud the investing public no matter what label the promoters apply to their products.”

The lawsuit accuses the Barksdales of breaking federal securities laws and seeks injunctive relief, disgorgement plus interest, and civil penalties in the United States District Court for the Southern District of New York.

Investors should be aware of possible crypto investment scams and investing based on social media, according to the SEC’s Office of Investor Education and Advocacy. The growing popularity of cryptocurrencies acts as a breeding ground for scammers and fake projects to nourish.

BitConnect founder accused of Ponzi scheme has vanished

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Satish Kumbhani, the founder of BitConnect, has gone missing a week after being charged in a $2.4 billion Ponzi scheme that allegedly deceived investors in the United States.

The US Department of Justice (DoJ) indicted Kumbhani, an Indian citizen, with criminal charges last week. In September 2021, the Securities and Exchange Commission (SEC) filed a separate lawsuit against Kumbhani, alleging that he fraudulently obtained more than $2 billion for BitConnect. The issue currently is that Kumbhani is no where to be found.

SEC

Officials stated in a legal filing on Monday that Kumbhani has most likely left India and that his whereabouts are uncertain. This comes after the SEC learned in October 2021 that Kumbhani had likely moved from India to an unfamiliar address in another country.

Extension plea in BitConnect’s founder missing case

Richard G. Primoff, senior trial counsel in the filing has requested an extension until May 30 from U.S. District Judge John Koeltl.

Primoff also stated that the Commission has been in contact with the country’s banking regulatory agencies since November in an effort to track out Kumbhani’s address. At this time, however, Kumbhani’s whereabouts are unclear, and the Commission is unable to say when, if ever, its attempts to identify him will be successful. He further stated,

“The Commission did not know the whereabouts of Kumbhani, an Indian citizen, at the time it filed this action, and BitConnect is an unincorporated entity the Commission must serve through its manager, Kumbhani.”

BitConnect, which was founded in 2016, was one of the biggest and most popular projects in the mid-2017 initial coin offering (ICO) craze, raising billions of dollars from international investors for a protocol that allegedly paid out 10% in interest earnings via its BCC token to investors, with users who “referred” other investors receiving even more benefits.

However, platform administrators closed BitConnect’s earning platform on January 16, 2018, when the company’s product came under growing scrutiny from legislators and investors. In the days following the platform’s collapse, BCC prices plunged to below $1 from a prior peak of about $500.

Such circumstances sparked a legal struggle in the United States to bring BitConnect’s founders to justice, with Kumbhani and American citizen Glenn Arcaro at the heart of the plan. On 1 September 2021, Arcaro pleaded guilty to criminal counts, comprising conspiracy to commit wire fraud and criminal forfeiture.

Ripple vs SEC takes a new turn following decade-old legal memos; More details

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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.

VanEck rolls out its First Multi-Token Cryptocurrency Fund

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Starting 2022 with a bang, prominent investment manager VanEck announced the launch of its first cryptocurrency fund in the evening hours of 31st January 2022. As per the press release, the fund is listed as an exchange-traded note, or ETN, on the Deutsche Borse Xetra and SIX Swiss exchanges that would provide exposure to the spot prices of Bitcoin [BTC], Ethereum [ETH], Polkadot [DOT], Solana [SOL], Tron [TRX], Avalanche [AVAX] and Polygon [MATIC].

Just a week ago, the firm expanded its footprint in the European market as it launched a new Exchange Traded Note [ETN] that facilitates users to invest in a selected basket of the largest cryptocurrencies with the greatest liquidity. As of now, The ETN tracks six of the largest crypto assets, such as bitcoin, Ethereum, and Solana.

Speaking on the latest development, Gijs Koning, Head of Portfolio Management & Operations at VanEck Europe stated,

“We were first to market in Europe with many of these exposures because we’re believers in the transformative nature of the underlying technologies, and because providing exposure to transformative investments is at the core of our firm’s DNA. In early 2017, we determined that digital assets could provide a store of value alternative to currencies and gold, as well as a host of technology solutions that could bring down costs in the payments and investing industries.”

Unlike its growth trajectory in Europe, the same cannot be said in its home country where the New York-based investment firm had to face regulatory hurdles.

VanEck’s tryst with US regulators

Last November, the U.S top financial watchdog- Securities, and Exchange Commission rejected VanEck’s application for a Bitcoin spot ETF as reported by TronWeekly. The regulatory agency in its response cited that the underlying exchange responsible for listing the ETF, Cboe BZX, did not have a proper “surveillance-sharing agreement with markets trading the underlying assets [of Bitcoin].”

At this point in the United States, VanEck’s financial offerings are currently limited to providing a range of digital asset private funds for high-net-worth individuals and institutions, as well as several exchange-traded funds.

Another Spot Bitcoin [BTC] ETF in Canada while the US still awaits

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Fidelity Investments is prepping to launch a spot Bitcoin [BTC] ETF in Canada while its filings for the same are yet to receive the green light from the Securities Exchange Commission [SEC] in the United States. With respect to the financial service firm’s ETF, dubbed as the Fidelity Advantage Bitcoin ETF [FBTC], which would directly acquire physical BTC meaning the investment vehicle would purchase actual Bitcoin rather than obtain it via a derivative instrument.

The latest maneuver provides a much-needed shot to the arm for one of America’s leading brokerage entities having a total of $4 Trillion assets under management [AUM] is catering to its burgeoning clientele based in neighboring Canada. While in its home country, regulators are still figuring out whether or not to allow a spot BTC ETF.

This is not the first time spot BTC exchange-traded fund has been approved. A few days ago, Singapore became the newest entrant as it now offers a ‘Physical’ BTC fund created by its homegrown Fintonia Group. Citing the latest development, Ravi Menon, Managing Director of Monetary Authority of Singapore [MAS], noted that the best approach would be not to impose a total ban on these instruments. Speaking on the choice of the king coin, Adrian Chng of Fintonia reportedly said.

Bitcoin is an excellent form of collateral for loans. It trades 24/7 and is highly liquid, with approximately $30 billion to $60billion per day. If required, it can be quickly liquidated in comparison with, for example, commodities and real assets.

On the other hand, U.S firms’ have struggled so far to gain approval for the spot fund from the country’s top regulator. To top that, the recent development in Canada has irked many in the crypto community. One of them is prominent investor, Lark Davis who expresses his frustration with regards to SEC’s stance.

No Bitcoin [BTC] ETF in US?

So far, the market has welcomed a number of futures ETFs such as the ProShares Strategy and Valkyrie Bitcoin Strategy but the question arises as to when will the U.S. regulatory body would finally approve the first spot Bitcoin ETF? Steven McClurg, the co-founder of Valkyrie, in an interview with CNBC stated that a spot ETF ‘won’t be until at least middle of next year.’ Grayscale Investments, which recently filed to convert the popular BTC trust into a spot ETF, is also eyeing the same by summer 2022.

Even, David LaValle at Grayscale Investments who heads the ETFs division, stated in a MarketWatch interview that he too sees the possibility of regulators giving the green signal for a spot-bitcoin ETF by July next year.

Kevin O’Leary not interested in being a ‘crypto cowboy,’ steers clear from Ripple

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Kevin O’Leary, aka Mr. Wonderful from the popular show, Shark Tank, says that he is not interested in investing in Ripple because of the ongoing case with the United States Securities and Exchange Commission (SEC).

The case has been going on for several years and has garnered the attention of many crypto supporters and speculators as well. He considers that investing in XRP is a “very bad idea” and has “no interest in being a crypto cowboy.”

In an interview with CNBC, the billionaire investor and chairman of O’shares ETF talked about Bitcoin, Ripple, and its lawsuit with the SEC. Kevin O’Leary insisted that he has “zero interest in investing in litigation against the SEC.” “That is a very bad idea,” he added.

Kevin O’Leary is not interested in Ripple

The SEC sued Ripple and its CEO Brad Garlinghouse and co-founder Chris Larsen for selling XRP tokens worth $1.3 billion, which it claims to be an unregistered security offering.

As per Kevin O’Leary, the real capital lies with the approval from regulators because they have the upper hand.

“I have no interest in being a crypto cowboy and getting anybody unhappy with me because … I have so many assets in the real world that I’ve invested in already that I have to be compliant.”

said Kevin O’Leary

The Shark Tank investor is known for his practical and safe-playing tactics. Recently, he declared that cryptocurrencies amount to 10% of his total portfolio and said that he expects trillions of dollars flowing in Bitcoin in the near future.

While Bitcoin is currently below the $56,000 zone and is trying to regain this level, this has been a marvelous and active year for cryptocurrencies.

Ripple’s CEO claimed in a recent statement that he sees “pretty good progress” in its lawsuit with the SEC. Even the CEO of Coinbase, the largest regulated cryptocurrency exchange in the United States, Brian Armstrong, said that the lawsuit is definitely going in favor of Ripple.

Contrary to Kevin’s believes, Ripple continues to gather support from countries due to its excellent performance. Recently, the Republic of Palau said that it would be partnering with XRP to release a stablecoin.

SEC calls for an open meeting on Dec. 2 to discuss crypto

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The United States Securities and Exchange Commission (SEC) announced on November 24 that the topic of the upcoming crypto panel under the Investor Advisory Meeting on December 2 would be “Helping to Ensure Investor Protection and Market Integrity in the Face of New Technologies.”

The SEC notified that it would hold two-panel discussions. The first-panel discussion would be regarding cryptocurrencies and digital assets, entitled, “Helping to Ensure Investor Protection and Market Integrity in the Face of New Technologies.” The other panel discussion would be regarding the SEC’s possible role in addressing the elder financial abuse problems. 

The first-panel discussion’s agenda will primarily focus on the regulatory structure and will cover market structure issues, digital assets, and underlying risks in the upcoming technologies and innovation. Other than this, the panel is also expected to discuss NFTs, crypto-based exchange-traded funds (ETFs), blockchain technologies, and stablecoins.

Before this, the SEC announced on November 15 that the meeting is open for the general public, and moderators and panelists will participate in the meeting remotely.

The panelists have been decided very thoughtfully as almost 50% of them are in blockchain-specific roles. The other half of the panel has members such as financial market experts and luminary law professors. The blockchain-oriented members are:

  • Ali Emdad, founding director of the Center for the study of Blockchain and Financial Technology and professor and associate dean at Morgan State University’s Earl G. Graves School of Business and Management.
  • Sydney Schaub, general counsel corporate secretary and chief legal officer at Gemini
  • Tyrone Ross, CEO, and Co-founder of Onramp Invest, Founder of 401stc
  • Kristin Smith, executive director of The Blockchain Association

SEC meeting might include its recent actions

The first-panel meeting about the crypto discussion is decided to start from 10:45 am to 12:45 pm EST. The session will be a webcast on the official website of the SEC. The introductory session for the meeting will begin at 10:00 am EST.

The SEC’s controversial decision to deny Jan VanEck’s spot ETF proposal and the form of the Commission’s involvement with the crypto industry are expected to be reviewed, although the particular questions to be discussed by the panel have not yet been disclosed to the public.

XRP to be added in Ripple’s new liquidity program

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XRP continued to be at the crosshairs of the SEC but that has not deterred the blockchain firm Ripple to include the crypto in its new program.

The US-based fintech firm recently announced a new product category dubbed Liquidity Hub that would empower financial service providers to enable their customers in crypto asset trading without any hassle. Revealing more on the blog post, Ripple said that customers would be able to trade in a wide catalog of cryptocurrencies including XRP, Bitcoin [BTC], Ethereum [ETH], Litecoin [LTC], Ethereum Classic [ETC], Bitcoin Cash [BXC], etc.

Besides, the payment settlement firm also plans to include other crypto assets like non-fungible tokens [NFT], in the future. Currently, the new program is in the stage of development and is slated to be launched in 2022. The newly added program would also offer their clients better accessibility from a wide range of market options such as Exchanges, Over-the-counter desks [OTC], market makers, etc.

The latest announcement assumes significance against the backdrop of surging prices of cryptocurrencies in the broader market ecosystem. The world’s two most dominant crypto assets, Bitcoin and Ether continued to record new all-time highs amid an upward rally in the overall cryptocurrency market.

Ashish Birla, General Manager of the firm said that the newly launched product would act like an ‘aggregator for various liquidity venues and individual assets, the way that Google Flights is for airlines and flights.’ Speaking further on the occasion, Birla said,

“We have a long history of working with financial institutions, crypto exchanges, brokerages and market makers, which our enterprise customers can now directly benefit from. We’re planning to support a variety of assets and have plans to expand to more tokenized assets like NFTs in the future.”

XRP’s ongoing tussle with SEC

Ripple has been currently embroiled in an ongoing dispute with the United States regulator Securities and Exchange Commission [SEC]. In the latest turn of events, Magistrate Judge Sarah Netburn has officially ordered the blockchain service provider to ‘find and produce both video and audio recordings of its internal meetings for evidence in the case.’

The Financial agency is prosecuting Ripple along with co-founder Christian Larsen and Chiel Exec Bradley Garlinghouse for allegedly raising funds through sales of more than $1.3 billion worth of XRP tokens and deemed them as unregistered securities offerings.

XRP as a security is a no-go; Settlement with SEC out of the picture, Garlinghouse affirms

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The entire world witnessed the Ripple vs. SEC case where the financial watchdog proceeded to label XRP as a security, while Ripple tried to shun off these accusations. As this lawsuit persists, both the parties have time and again been asked if there were any chances of a settlement. The SEC as well as Ripple have outrightly suggested there were no possibilities of a settlement.

More recently, Ripple’s Brad Garlinghouse appeared in an interview with Fox Business’s Charles Gasparino and clarified that settlement wouldn’t be possible if the SEC continued to deem XRP as a security.

While 2021 started out as a great year for almost all the crypto assets in the market, XRP was the only one to suffer the wrath of the Securities and Exchange Commission [SEC] of the United States. The regulator went on to categorize XRP as a security and accused Ripple of selling “unregistered securities.” This caused immense loss to the asset as it was ousted by prominent crypto exchanges.

Despite garnering the support of regulators from across the globe, Ripple failed to convince the SEC. This battle appears to go on for a long time. While Garlinghouse did not mind settling, deeming XRP a security would certainly dement the chances of a settlement.

XRP ETF in the making?

Steering away from the Ripple vs. SEC case, Garlinghouse was asked about the chances of an XRP exchange-traded fund [ETF] in the US. The approval of the ProShares Bitcoin ETF got the hopes up high of many firms.

Addressing the same, Garlinghouse put forth a question of why a government entity was filtering or picking winners and losers.

“Why is the SEC picking winners and losers?”

Furthermore, Garlinghouse called out Gary Gensler, the chairman of the SEC for staying mum on Ether. While noting how the SEC has been consistently asking for clarity pertaining to everything crypto-related, Garlinghouse pointed out that it was rather “ironic” for the SEC to keep its lips sealed about Ether.

The citizens of the US had to wait long and hard to garner a Bitcoin ETF. Several speculate that an altcoin ETF in the US was still a far-fetched thought.