The Hinman Docs, with an All-Star Legal Panel【文字起こし】

John Deaton, Founder of Crypto-Law and Managing Partner of the Deaton Law Firm
Carl Cecere, Council for Rosalind Leighton
Marc Fagel, Former SEC Regional Director (specialized for enforcement and security)
Jeremy Hogan, Legal Briefs

John Deaton:
We are live. Welcome to CryptoLawTV.

I’m John Deaton, the founder and your host.

And today is a very big day – a very special show for everybody.

Today is the fifth anniversary of, in my opinion, arguably the most infamous speech ever given by a senior director or official from the SEC.

Bill Hinman, former director of Corporation Finance, gave his infamous June 14, 2018, speech that declared Ethereum, although it started as a security, is no longer a security.

Very big market-moving news.

And the emails that were just unsealed, that were fought for two and a half years, seven court orders, emails that were going to shock us or that were well worth it, all of those things got released.

We’re here to talk about it.

And my first thoughts are this:

The emails have been described by some as a “nothing burger”.

They’ve been described as some as pure proof of corruption and all of this.

The reality is, it depends on your perspective.

Right, if you were anti-Ripple, anti-XRP, it’s a “nothing burger”.

If, in fact, you are an XRP holder, it’s validation of everything that you knew was transpiring behind the scenes, sort of got validated.

I will believe it’s validation.

I do believe that because CryptoLaw put a video library out together that kind of documented all these events and we demonstrated what we believe was taking place behind the scenes.

And in fact, these emails, these speech drafts, absolutely prove that.

A CoinDesk article just came out discussing XRP holders in the fight that we’ve been engaged in for years.

I want to set the stage though for people to understand this speech.

On December 13, 2017, that’s when Hinman met with Consensus and Joe Lubin and the ETH founders.

And he was represented, and Consensus was represented by Jay Clayton’s Farm Sullivan and Cromwell, and they got these meetings.

Those meetings continued for months and months leading up to the speech.

In January, Jay Clayton gave a speech, and he went with Chris Dixon at a16z.

And they discussed what these market participants wanted.

And Jay Clayton said “Put together a memo and give it to Bill Hinman”.

That memo, right there.

There’s more meetings after that.

But that memo was dated March 26, 2018, by Perkins Coie.

That’s the infamous memo there.

This working group, which was of ETH investors primarily, put together a memo and gave it to Bill Hinman.

Two days later, they had a meeting about that memo and what they were asking.

And that memo basically you see it as it appears in the speeches.

May 3rd was the first time we see that there is a draft of the speech.

Okay, and that look what its title: May 3rd. “When does a security stop being a security?”

You’re going to learn that this was all about the acceptance that ETH started as an ICO, a pure securities offering.

In fact, later on in that same document, it says ETH clearly started off as a security, a pure ICO.

Right there, clearly began securities offering because it’s an ICO.

There was no foundation, there was no network yet, no blockchain.

They raised the money and they built it.

So everyone agrees an ICO, a pure ICO is a securities offering.

And so then, we see another rendition of the speech on May 24th.

And that’s when we see the first real speech.

Guess what words that were used in that Perkins Coie memo appear verbatim.

Words like “irrational exuberance”.

Right, that’s something odd.

That was in the Perkins Coie memo that shows up in the initial draft.

Something that I believe in – “the token itself is not a security”.

That’s in the Perkins Coie memo that ends up in the first draft and in the final draft.

So the bottom line is the ETH investors who met with Bill Hinman, their memo, it tracks his speech.

And then finally, on June 4th – well, remember that first title?

I just showed you, “When does a security stop being a security?”

Bill Hinman called it something different.

He called it “The Ether Speech”.

Notice in the speech, he talks about Bitcoin and ETH, but he doesn’t call it the “Bitcoin and ETH Speech”.

He calls it “The Ether Speech”.

What we learned from the emails, finally, was that Hinman was not following the law.

His own people, Director Trading Markets/Office of General Counsel, were saying, “Stick to Howey”, “Stick to Howey”, “Stick to the law.”

You’re bringing up new factors – sufficient decentralization, asymmetries, things of this nature, that they’re saying, “Hey, leave that stuff out.”

But Bill Hinman kept it.

He included actual elements and points that the Office of General Counsel said are irrelevant.

But he wanted it.

And those things, of course, were something like if a group owns a substantial amount of the tokens and they’re motivated to increase the value.

Bill Hinman said that was important.

The director of the Office of General Counsel said “Not so much.”

Now, why would Brad Garlinghouse say that’s shocking?

Because you can see the roadmap where Ripple’s being targeted and ETH is getting a pass.

And so, that’s my initial thoughts.

What I want to do is, I have an All-Star panel for you.

And the first person I want to bring out is Carl Cecere, who is an attorney, Council for Rosalind Leighton.

There he is.

And he’s someone who fought for these documents.

He actually played an important role, him and Rosalind Layton, to get these documents, putting added pressure on the judge that says, “You know, here’s a motion. These need to be heard by the public.”

Carl, welcome, appreciate you being here.

Carl Cecere:
John, thanks so much for having me on.

I really appreciate it.

John Deaton:

So my first question to you is…

I know Rosalind has shared her own analysis in an article, and there it is in DC Journal.

It was a great article, as usual, from her, but I want to get your thoughts.

Why did you file the motion that you did?

Carl Cecere:
Well, I wanted to do it because Rosalind asked me to help her.

And I think collectively, we realized that the Hinman documents were not only really important to Ripple.

And they’ve got obvious importance to its fair notice defense.

But they’ve also got a lot of importance to the public.

I kind of took Rosalind’s lead on this.

Because she’s more of an expert in the regulatory area than me.

But you know, it’s really important for us to all understand how the SEC is making decisions about how to regulate cryptocurrencies.

It’s not only important for Ripple, it’s also important as the agency goes into this new year.

We have a new currency, we have new issues to be dealing with.

So there’s a lot of scrutiny.

And of course, it’s important to all of the XRP holders and to your clients and everyone else to see what’s happening inside the SEC.

So we thought it was going to be important to expose those ideas about developing the Hinman speech to sunlight, to see “How much thought really went into this?”, “Who might have been pushing back on what Hinman was saying?”, and “Did the agency officials think that they were giving enough guidance?”, “Was the agency functioning properly?”.

These are really important questions for everyone.

We wanted to bring them out.

John Deaton:
Okay, now let me ask you what.

Because I think what you did was very important.

And I would encourage others that have an interest, such as Rosalind, to employ the same tactics.

I filed a motion to intervene on behalf of individual XRP holders.

It’s a very odd.

Some people call it bizarre motion.

Because we were saying “Bame us as defendants too because you’ve effectively sued us”.

What was your legal argument to even obtain these?

Because I want others to be motivated or inspired by such moves.

Carl Cecere:
So, our basic right to come into the case, it stems from Rosalind’s status as a journalist and a scholar in this area.

And it’s because, in an argument, that’s really specific to sealing motions and whether or not information should be revealed to the public.

It’s different than trying to make yourself a party to the case or trying to intervene explicitly on one side.

What you’re really saying is, in a motion like we filed, we just think that these documents that somebody wants to keep secret ought to be made public.

It’s because the First Amendment gives the public the right to see, presumptively, what is in court documents.

In this case, Ripple made the Hinman documents court documents by appending them to its Summary Judgment motion and in support of its Fair Notice Defense.

So, we’re saying that everybody should be able to see that, not just Ripple.

The SEC opposed that motion, saying “We have a lot…”

John Deaton:
Let me take a guess.

We don’t want you to see how the sausage is made.

If you unseal this, it’s going to chill people in the future from having independent, open dialogue, and all those arguments.

Carl Cecere:
Well, I think “You don’t want to see how the sausage gets made” is probably the subtext.

The text of what they were saying was, “Yes, we’re doing agency deliberation here.

This is really important. We don’t want to chill the free exchange of ideas.”

There was some discussion early on that.

Some of the people who were consulted were lawyers for the SEC.

So they might have an interest in Attorney-Client privilege and work product in the speech.

A lot of that stuff fell by the wayside before we even got involved.

A lot of it fell away because, at the end of the day, the SEC was kind of speaking out of both sides of its mouth on the whole issue of the Hinman documents.

On the one hand, they were trying to minimize their importance.

Kind of “Don’t look. There’s nothing to see here.

These are not the droids you’re looking for.

Because this is just a private speech by Hinman. It doesn’t reflect the policy views of the SEC”.

That was probably the early tactic that the SEC took on those documents.

But then, I think as they became more scrutiny from the public, from people like you, and your Mikey John, I think they started to worry a little bit more.

Then they started to raise these issues about privilege, agency deliberation, and the need for a free exchange of ideas, etc., as grounds to overcome the First Amendment right to have these documents made public.

John Deaton:

So I have to ask you.

You’ve seen some of the emails.

I imagine you’ve looked at it.

What’s your take?

You fought to get these.

So I want to know what you think of them.

Carl Cecere:
So, we sort of anticipated what might be in these documents that we can’t see.

I thought maybe there might be pushback inside the agency.

Maybe somebody might be saying, “There’s not enough guidance here. Maybe we shouldn’t be adding a lot of factors onto the Howey Test.”

These were things that we anticipated, and on that score, the documents turned out to be much more significant than I originally thought.

You have everything.

All the ingredients that we thought might be there.

You have pushback from inside the SEC.

And most strikingly, you have pushback from SEC general counsel, the person in charge of deciding who’s going to get charged, saying, “No, no, no, we don’t think this is enough. We don’t think this is right. And then, you have Hinman going out into the public and saying these things anyways. ”

It’s essentially the agency deceiving the public because you’ve got the SEC general counsel saying, “I do not want to do this. I don’t want to enforce on these terms. I don’t want to go out there without enough guidance. I don’t want to be adding a bunch of legal tests that don’t really have support. It’s going to create more problems than it’s worth. And you have Hinman going out and doing it anyway.”

And that was really striking to me.

I’m not saying that they’re definitive.

I think you’re right.

There’s a lot of documents here.

And people are going to look at them and largely see what they’re expecting.

But we were surprised at the degree of pushback that Hinman was getting inside the agency.

Specifically about lack of direction and the fact that this whole approach of making a speech and then going ahead and suing some guys wasn’t likely going to work.

John Deaton:
I made a prediction that the documents would make even people who are not as close to the case as I am, who’ve been arguing about conflicts of interest and all that, would make a normal person be like, “Why? Why go on a limb and give this speech?”

Do you find yourself in that category?

Carl Cecere:
You know, I’m not an expert on the SEC.

But I do keep watching the agency’s moves in this space.

And “why” is the question that keeps popping up.

I mean, they could propose a rulemaking.

They could give some more official guidance.

But instead, it’s almost like they’re deliberately trying to hide the ball and then going out and seeking billions of dollars from issuers.

That’s really a troublesome way to go about doing business.

I mean, he tied back to this.

But that’s kind of what we’d hope to shine a light on in having these documents made public.

We’re really glad that it worked.

Because it shows an agency in dysfunction over this particular area of regulatory enforcement.

John Deaton:
Well, listen, I’m glad and you just gave me a perfect segue for me to bring on a couple other guests.

I know that I want to thank you for your time.

Maybe if you’re still around at the end, we’ll bring you back and ask you some questions.

But if you’re not and you’ve got to go, that’s fine as well, Carl.

Because we do have someone who worked at the SEC who’s been in there while the sausage was being made.

And maybe he’ll be able to give us some perspective.

Okay, what I wanted to say first is, “Thank you”.

And I’ll talk to you soon.

Okay, Carl.

Carl Cecere:
I really appreciate it. Thank you, John.

John Deaton:
Thank you and give my best to Roslin.

I have Marc Fagel as one of my guests, along with someone everyone knows in this community, Jeremy Hogan.

I told Marc before we came on air live, “When you go on a limb and disagree with me publicly but you do it with such good civility and respect, you’re rewarded by me asking you to come in.”

Because I think it’s important, Marc, that we get your perspective.

And You’ve been someone who’s taken the other side.

And I want people to know that you’ve been an SEC enforcement lawyer but you’ve also fought the SEC as a defense lawyer.

So welcome, Jeremy.


Thank you so much.

Jeremy is someone who I know that if there’s one person that maybe’s read everything more than me, it would be Jeremy Hogan in this case.

So I’m happy to get your perspective as well, Jeremy.

So first, Marc, I do want to ask you.

Were you listening to me and Carl?

Marc Fagel:
Yeah, I was listening to you.

John Deaton:
And so, I just asked you, “do you have any thoughts on his conversation about why the SEC would allow this speech to go out if there was pushback?”.

If you have a thought on that.

Marc Fagel:
Yeah, you know, I try to stay away from ascribing motivations to people.

As you said, having been on both sides, I could put on my SEC hat and say this is all good faith.

It’s an emerging legal issue and people within the agency are struggling with devising a policy.

And maybe some people wanting to put out what’s essentially a think piece, and others taking the more traditional view that really that’s dangerous to do that.

I could put on my defense counsel hat and say, “Well, once it’s out there and others within the agency are pointing to it, obviously that’s going to create perceptions or misperceptions.”

So yeah, I do try to see both sides of it.

I don’t like to leap to “Oh, there’s something unethical here,” although obviously we can all agree that there are some conflict issues here and some really disappointing conduct here.

But for the most part, I look at this as okay.

This is how the sausage is made.

But there’s a reason for that.

Anytime there is some emerging issue, there are different voices.

The SEC is not monolithic.

My background was enforcement and there were a lot of cutting-edge issues I worked on.

I was there for 16 years at a pretty high level.

And there were always issues that would be controversial.

Other divisions would push back.

I would be sometimes embarrassed if that were to get seen, especially if we went into litigation and that could be exploited.

But that is a natural Way of developing policy.

John Deaton:
Okay, so there’s probably been nothing…

Jeremy, I want to turn to you.

And Marc, we’re going to come back to some of the things I want to unpack about the agency, and what it might be like to be in enforcement right now with all this public publicity on these emails.

But Jeremy, we gotta…

I said that this is probably, other than Summary Judgment.

These emails are probably the most anticipated issue in this case.

Would you agree with that or disagree?

Jeremy Hogan:
So far, absolutely, other than the end of the case.

Yeah, absolutely.

John Deaton:
And it’s one of those things.

I mean, do you have any thoughts on the anticipation, that and the build-up for two and a half years and seven years?

Do you have any thoughts on that?

And then I just want your thoughts on the email, and then I’ll go to Marc.

Jeremy Hogan:

So obviously the last two years, I mean, we’ve been waiting to see what’s in these emails for two years now, right, John?

So the anticipation and the build-up has been almost impossible for reality to meet expectations, right?

There’s no big bombshells that we’re seeing in these emails.

There’s nothing that jumps out at you saying, “Haha, Ripple’s gonna win!” or “Haha, the SEC is going to lose!”

There’s nothing in these emails that screams that out.

There’s no…

You know, we were kind of thinking maybe there would be someone in the email that would have said, “Hey, what about XRP? It’s just like Ether. Why aren’t we including that in our analysis?”.

So we don’t get anything like that in the emails.

I think when I first read the emails, the first thing that jumped out to me was that I got this feeling, that is really bad for Hinman of all the people involved.

It’s obvious that he was pushing the Ether free pass, which had just been some conjecture on Twitter up to this point.

And then, we really see in these emails that right from the get-go he even named, like, the title of his first email was the “Ether speech,” and right from the get-go, he’s saying Ether is not a security.

And that was the point of him making the speech.

And you got to think, “Well, why did he have to use Ether as an example?”.

Why couldn’t he just say, “Once an asset reaches a certain level of decentralization, then it’s no longer a security”?

“Why did he have to use Ether?”

And I think what I came away from reading the emails was, “Wow, there really was something going on here.”

And I haven’t really talked about that too much in the past because I’m really focused on the case.

But I think if I was William Hinman, I’d be more concerned about these emails than maybe if I was the SEC.

John Deaton:

Marc, let me ask you first.

What’s your thoughts on the emails?

And I do want you, after you give us your general thoughts, they give us an idea of what you think might be is.

This, these emails being public.

Is that embarrassing to people at the SEC?

Or if it was you, would it be?

Or is this no big deal?

If you could give that perspective as well in addition to what your overall thoughts on the emails are.

Marc Fagel:
Yeah, it’s hard to quarrel with anything Jeremy said on the ethical aspect, and certainly the optics.

I don’t want to ascribe motivations.

I’ve never met Bill Hinman.

I don’t want to get behind that door there.

But yeah, it does seem unusual.

And I think people on the staff would chafe at that.

I mean, just to give an example, I ran a regional office.

I had over 100 people working for me.

I had to tell them when they went to visit an advisor or a broker, or one of the registrants that we evaluated.

They couldn’t take a muffin.

I mean, literally, you could take a Diet Coke, but you could not take a muffin that was offered to you.

That was the sort of ethical strictures.

I mean, the SEC, almost to a fault, is religious about that.

So when you see something like this and the suggestions that you can draw from these emails, that would be frustrating.

It’s frustrating to me as an alum.

And it’s frustrating, I’m sure, to the staff to see that.

At the same time, I do try to focus on the case itself.

I think, in one box, you have what Jeremy is talking about in the optics of it, but you ultimately have the Ripple case.

And I do think it’s important to second what I think the two of you are saying, which is there’s no real bombshell here on the merits of the case.

And I think that’s most important.

There’s nothing in here that tells you that there is a problem for the SEC’s view of whether or not Ripple violated the law through an offering.

There are some defense issues here, obviously.

I think, in terms of the scienter of the two individuals who are charged, it’s more fodder to show if there is confusion within the SEC.

How do you charge individuals with this higher level of intent that needs to be shown for an aiding and abetting charge?

That was already a pretty weak case.

I was surprised the SEC brought it.

I can speculate about why they might have.

But that was always a little weak.

And this certainly doesn’t help strengthen the SEC’s case, to say the least.

And then you’ve got this Fair Notice Defense.

I do think there’s a bit of a risk perception in the public that it’s not a very strong defense generally.

I don’t know if there’s ever been a successful Fair Notice Defense against the SEC.

It’s much narrower than people, at least in the Twitter universe, seem to think.

But to the extent that there is some receptivity by this court to that defense, there is some material that the defense can work with in the emails that’s there.

But for the underlying merits, I don’t see any game changers.

John Deaton:
Let me ask you then.

I’m going to turn to Jeremy because I have to ask you this.

I don’t get to talk to many SEC alums who’ve got the kind of experience you do.

I got to tell you, we see the SEC and Senior Personnel, including Gary Gensler, refusing to talk about specific platforms, tokens.

It was the way.

It was before the speech.

And it’s been the way.

It is ever since this speech.

And when you say something as market-moving as “ETH is not a security” and give that kind of regulatory clarity, I gotta believe that would be normally the SEC ethics office would be involved.

Wouldn’t that be screened?

Or how does that work?

I’m sure you gave speeches.

Is there an automatically you submitted and it gets reviewed?

Because it’s shocking to me.

Because I’ve taken the position that a first-day paralegal would have been able to find the conflicts.

His law firm had an IPO with Canaan that did Bitcoin and ETH mining equipment that was being worked through.

His law firm was a member of the Enterprise Ethereum Alliance.

He had previous knowledge with these individuals.

And so, how does it work?

It’s just mind-boggling to someone like me.

I looked at the email distribution.

And the one division missing, Marc, is the ethics office.

So, anything you can clarify?

Marc Fagel:

So let’s break that into two pieces on the optics of it.

And I agree with you, I think there’s been a lot of pushback on Chair Gensler being so reluctant to address ETH and his Congressional hearings and so forth.

Whereas for me, that’s the norm.

He should not be speaking about any particular asset out there.

So that’s why the Hinman speech does stand out a little bit.

That is not the SEC’s norm to address a particular entity that the SEC may or may not be regulating. Maybe Bitcoin, there’s an argument there’s something different about that, but that does stand out.

In terms of ethical clearance, I gave speeches all the time.

Mine were generally different.

I have an enforcement background.

I would generally be invited to panels and programs to talk about what’s the SEC Division of Enforcement doing.

Here are all the insider trading cases we brought in the last year.

Here are some trends.

Here are some of the things we’re seeing in the industry.

I wasn’t really devising policy, so this is a little outside my background.

And partly because of that, it was not my understanding there would generally be a separate ethics office review of the presentations because it didn’t typically raise ethical issues what I was doing.

The General Counsel’s office would review our public statements.

My assumption was they were there as an issue spotter for potential ethics issues.

There’s not some grand chasm between the General Counsel’s office and the Ethics office.

It may even be that the Ethics office reports into the General Counsel.

So I don’t see that as a huge divide.

It doesn’t strike me as strange generally that there is not a separate ethics office review.

There are some differences here, obviously, because of the well-publicized issues that Bill Hinman had in terms of his pre-existing relationship with his law firm. That’s a little bit different.

That was not my experience when I gave speeches.

When the other officials that I was friends with would give speeches, we didn’t have conflicts of that nature, so it wouldn’t be “we need to run this by ethics.”

That was not a present issue for us.

John Deaton:
Alright. Jeremy, and we’re going to come back, Marc, and talk about the Office of General Counsel.

I want to follow up on that.

But Jeremy, right now, so the XRP holder that follows you, that’s followed me, you’re probably the best voice for them as far as they rely on your interpretation.

They’re sitting there saying, “Okay, John, we’re like 27 minutes into your show. How do these emails impact me as XRP holder who is waiting for this result? What impact, if any, does this have on the case?”

Jeremy Hogan:
Well, I think the first thing is that, as far as the Section 5 violation, I don’t think these emails are going to come into play too much.

These emails would come into play at trial, which would be not until next year at the earliest, on a Fair Notice defense trial with a jury.

Now, I know Marc’s position on this because I’ve been following him on Twitter.

And by the way, Mark, if you don’t feel it, I think everyone really appreciates that you’re out there on Twitter.

Because you’re espousing the opposite view, you attract the haters.

I just want you to know that.

Everyone has got a hater.

Marc Fagel:
Yeah, Thanks, Jeremy.

Jeremy Hogan:
I’m trying to say we appreciate you for sticking your neck out there like that.

It’s a tough thing to do because I’ve been on the receiving end of some of the hate.

I’m sure you have too, John.

And it’s not easy.

But we really appreciate your input.

Because at the end of the day, what we’re trying to do is just kind of inform people that hold XRP, that don’t have legal background, what’s going on, what to expect.

And sometimes we get it wrong, sometimes we get it right, but we really appreciate your input for sure.

I think, and I disagree a little bit with you, Marc.

As far as how these emails could be used, because to me, I see a lot of fodder in here at trial if it does go to trial, maybe next year, maybe early 2025.

Because I think what you’re seeing is evidence that’s going to be used as to what when you have the regulators themselves having these discussions.

I know that’s how the SEC operates, but when you can get that information in front of a jury and you can say, “Look, Ripple’s being charged with breaking the law, they’re horrible people, look at what they did.”

And then you see that the SEC, the regulators themselves were also having some confusion, also arguing over what these things mean.

I think, I guess for me when I go to trial, and I’m in the middle of one right now, but I see myself as a lawyer.

My job is to make my client look good, and to make the other guy look bad.

And I think these emails could be used not so much to make the other guy look bad, but certainly to paint the picture of an SEC that was as confused as Ripple was.

And I think if you can get that in front of a jury, not so much a judge maybe, but in front of a jury, I think you could definitely use these emails to paint a Fair Notice defense.

And I know that they haven’t been a particularly strong defense in the past, but this isn’t just a defendant who’s coming in saying, “Well, I didn’t know what the law was, therefore don’t find me guilty.”

The SEC has done a lot of affirmative things with the FinCEN statement and all the guidance that they gave, and some of the contradictory guidance, because now they’ve backed off, I think this William Hinman speech to an extent.

But I think with all the affirmative things that SEC has done, I think if you can get this all in front of a jury, I think you have a good shot at the Fair Notice defense.

John Deaton:
Marc, any comments before I follow up on you?

Marc Fagel:
No, I think that’s fair.

I think there’s a difference between what could happen on Summary Judgment and in front of a jury.

I had lost cases at the SEC that we were pretty confident we’d win, just because when you have 12 jurors sitting in a room, it can go anyway.

And I think there is some receptivity to emotional appeal and being able to go out there and pitch that the SEC still hadn’t quite figured out what to do with crypto at this point, would have some appeal to a jury.

So, I definitely see that.

John Deaton:
Okay, now let me ask you, Jeremy brought up the point that a lot of XRP holders were thinking that maybe someone would have emailed and with these draft speeches, “What about XRP?” or took that kind of not necessarily fought for it but just inquired about it.

And to my knowledge, there is no discussion like that.

But at the same time, there was a memo all that was, and I know you’re aware of it, it’s June 13th, 2018, where enforcement lawyers like yourselves analyzed XRP and Ripple’s sales of XRP under the Howey test.

The judge ruled that privilege now, but the judge Netburn, Marc, she noted that there was no recommendation ever made at the conclusion of that memo that she read in camera.

And you could correct me if I’m wrong or disagree with me, I’ve taken the position that by inference that had the enforcement officer said, “Boy, XRP is clearly a security.”

There would have been at least tell Ripple to stop like cease and desist letter, recommendation of enforcement, something.

You wouldn’t go another, basically two and a half years before you bring an enforcement action.

Is that a misperception of mine, or do you think there’s some rationale in that thought?

Marc Fagel:
Yeah, it’s hard to speculate. I wouldn’t go as far as you go, partly because the investigation to my knowledge had not been done yet.

I look at this at the Summary Judgment papers and the amount of data and information that’s been developed by the SEC here is pretty voluminous, and I can’t imagine that was done in 2018.

So there’s a big difference between, in the abstract, based on what we know just from the public record.

“Maybe it’s a security, maybe it’s not.”

That’s very different from two years later coming and saying, “Here is the volume of tokens they sold, here’s what the market looked like, here are the representations they’ve been making.”

Everything that they based on the SEC summary treasure motion, that was not developed in 2018 to my, you know, I assume it was not.

So, it doesn’t surprise me that at that time they didn’t have the information to say, “We need to go and get a TRO (Temporary Restraining Order) tomorrow.” That certainly wasn’t present, and then of course they didn’t.

I don’t think in the building they had a set policy yet or decision on where to go with this.

I mean, you see that in the emails that this subject matter was in flux, and I’m again not shocked that between 2018 and 2020 there was a lot more conversation within the SEC, a lot more voices heard, and they began to move in a more aggressive direction.

And Ripple was sued as a result of those developments in policy thought and the investigative record.

John Deaton:
Let me ask you, too, on Officer General Counsel. Is that a higher-ranking office than Director of Corporation Finance, or is it equal?

Marc Fagel:
My understanding is they’re equal. There’s multiple divisions and there’s the Division of Enforcement, Division of Trading and Markets, Corporation Finance, General Counsel.

So, they’re all divisions. The heads of those are all appointed by the chair of the SEC, so there’s not a hierarchy among the divisions.

They each have a very different role in various processes, including enforcement.

John Deaton:
The reason I asked, Marc, is when the Office of General Counsel says, “You know, we don’t think you should put ETH in there, you shouldn’t give a direct statement like that.”

And Hinman ignores it and gives it, to me that seemed odd.

So, I want to ask you that. What’s your thought on that?

And then the second part is something that caught my attention.

I don’t know if it did you, but the Officer General Counsel didn’t say “Don’t include ETH because of any other reason other than it will limit our ability to say otherwise in the future.”

And if someone, you know, that frustrates me. Like, just give us some clarity.

Why do you insist on having the option to, you know, if you say it’s not a security, then we can’t forever prosecute them.

So, what are your thoughts on those two things?

Marc Fagel:
Yeah, on the latter point, I certainly appreciate that.

And having been on the defense side, and I represented some crypto firms when I returned to private practice after leaving the SEC in 2013.

So, I’m sympathetic to the frustration, “Why can’t the SEC just say this is or isn’t a security?”

I tend to go back to an understanding that, partly what I just discussed with you a moment ago, that until there has been an enforcement investigation, there’s not enough to go on.

The SEC can say, in the abstract, based on what we know in the public sphere, this may or may not violate the law.

But until there’s an investigation, it’s premature.

The SEC shouldn’t be making a prescription or giving people that sort of specific guidance because they don’t have a complete record.

And then, more broadly, the SEC, the Securities laws are by design very broad.

They’re designed to allow the SEC to be flexible to react to changes in the marketplace and practices.

I know it’s a little pedantic, and certainly, you know this, but for those who are watching this and don’t, the example I like to pull out is insider trading.

And I think a lot of people are shocked to learn there is no law against insider trading.

There is no statute that defines it or says that it’s illegal.

There is a broad anti-fraud statute that says you can use deception, essentially, or false statements in connection with securities.

And it was the SEC that, some 50 years ago, looked at insider trading and said, “This seems to be fraud. This seems to be a scheme.” And they sued people for that, and the courts, all the way up to the Supreme Court, said, “Yes, that is a form of fraud.”

So, that is the way the securities laws were designed.

As new schemes, new products emerge, the enforcement division has to be able to say, “This does or doesn’t violate the law,” and the courts are the backstop to either say, “We agree,” or “No, SEC, you’ve gone too far.”

So, I understand why the SEC would say, “Let’s not get too specific in a speech because we don’t know how the facts will develop.”

John Deaton:
All right.

Jeremy, I don’t know if you saw but Stuart Alderoty, General Counsel of Ripple, they tweeted out a video.

And Stuart had called for an investigation.

And into why this speech was given.

And I’m going to ask you both this now.

I would say to Stuart Alderoty, “Welcome to the party,”

Because I’ve been calling for an investigation and Crypto Law actually ran a video and a campaign, and we had the Connect to Congress campaign that delivered almost a hundred thousand messages to all members of the House and Senate, just wanting an inquiry as to why this speech was given.

So, I just want to ask each of you.

First, Jeremy, do you think at least with these emails it buttressed that request and that we should have at least an IG investigation?

Jeremy Hogan:
I do.

And let’s be clear and blunt about what Ripple’s really saying.

Because I think they’re nibbling around the edges of it because they don’t want to come out and accuse anyone of anything.

But we can speculate.

So, my speculation is that what Ripple’s position here is that William Hinman was somehow paid and he was paid by the Ethereum Foundation or someone related to Ethereum to give the speech, give Ethereum a free pass.

And then, at the same time and I think this is what really gets Stuart and Mr. Garlinghouse’s kind of gander, is that at the same time he then, at the end of the speech, lays out these criteria which, as his video mentions, have no basis in the Hinman test.

The first one is decentralization and the second one is how many tokens do the promoters still hold.

Neither of which have any foundation in the law, but which he’s kind of made up to apply to digital assets.

And if you really think about it, at the time, especially back in 2018, the one thing about Ripple was it wasn’t decentralized.

It was a banker’s token.

And you can imagine that that prong, that he just kind of made up out of thin air, from their point of view, is an attack on XRP because, at the time, Ripple had a lot of control over the validators and I don’t understand it exactly, but it wasn’t as decentralized as Bitcoin, for example.

And then the other, of course, big one is he comes up with this kind of test or something to look at, “How many of the tokens do the promoters still hold?”

It has no basis in the law, but it’s definitely something that you can say focused on Ripple because Ripple, of course, held like half of the tokens, XRP ever produced.

So, I mean to cut to the chase, what they’re saying is that this speech one, was an Ethereum free pass, but was also an attack, a hit piece on XRP, which at the time was Ether’s big competition.

John Deaton:
And the only thing I had before I asked Marc the same question, to what you said, Jeremy, is that Hinman now works at a16z, which are the people that helped write that Perkins Coie memo.

He’s a general partner there. So in addition to his law firm being a member of the Enterprise Ethereum Alliance, has an ongoing sharing profit.
The people that helped write the speech that ended up in the speech, some of their direct language, he’s a partner with them today.

And so, I throw that out there for consideration as well.

But Mark, you know I’m close to the cases which is why I wanted someone like you on the show.

What are your thoughts?

I’m not asking you to accuse anyone of anything.

But do you think it warrants an investigation?

And do you think there are people at the SEC who believe in it as an institution who would support it?

Marc Fagel:
Yeah, I know it’s unsatisfying.

I’m always very cautious to go there.

I mean, my job at the SEC was to look at the evidence and not speculate.

And then on the defense side, we would make that case.

And it could very well be that some of my former partners, who these days are representing Coinbase and Binance and others.

And I could very well have been doing that had I decided not to retire when I did, could make these arguments.

So, I leave that for others to do.

I think the point that I would make, just to close the loop on this, is I do think it’s important for people to realize that whatever one division director’s motivations may or may not have been, that the way an SEC enforcement action is brought is independent of that.

The Ripple case was brought because the Division of Enforcement conducted an investigation, recommended to the commission that they take a vote on authorizing them.

Three, at least three of the five commissioners voted to do so.

The Division of Corporation Finance would have a say in that, would be able to come in and, if they didn’t agree with the case, could potentially veto it or make it more difficult for enforcement.

But it’s enforcement and the commission going forward.

So, I do try to separate what may or may not have motivated this speech and particular positions the Corporation Finance took from this lawsuit.

John Deaton:
Well, let me share one more thought that you might not be aware of.

I know Jeremy is, that goes to sort of the motivations that Jeremy was talking about.

Bill Hinman’s last day at the SEC was December 4th and there were rumored settlement talks going on.

Brad Garlinghouse and others have talked about it.

Bill Hinman came back after he left, even though he had already left, and got involved in a meeting, and there ended up being no settlement.

I wasn’t there.

I can’t speculate what was said.

I just know it’s a matter of record that he left and came back and got involved, even after he had left the SEC.

And so, when you add all these up, it just starts, you know, at some point you see so much smoke that you gotta believe there’s a fire there.
That’s all.

And so, but I appreciate your thoughts on it.

Now, there’s a lot more documents that were unsealed other than the Hinman emails that are, honestly, more important.

And I know a lot of people might be surprised by that, but the Hinman emails are not, as both of you said, it doesn’t go to the underlying issue, which was, did Ripple sell XRP that constituted an unregistered offering or sell.

And that’s really what it comes down to.

And so, we know all the evidence that Ripple’s targeting the SEC and the Hinman and the conflicts and that, but I want to turn to the SEC’s case, underlying substantive case against Ripple.

Because one thing that Jeremy and I both shared when people would always ask us, “John, Jeremy, is there going to be, is the SEC going to win?, Is Ripple going to win?”.

And I’ve publicly said that this overarching theory that XRP is a security, despite the seller or the circumstance surrounding the sell, I believe the judge will reject that theory on whether or not she finds specific evidence, counter statements.

We didn’t get to see the exhibits and I want to share a few thoughts to the audience because we’ve learned some of that.

And before I talk about the case against Ripple and the SEC’s chances, I think it’s important to point out that we’re living in an age of Celsius and FTX, you know, Sam Bankman-Fried, Luna UST fraud cases that have happened.

Ripple was investigated for two and a half years prior to this enforcement action.

And after the two and a half year investigation, they were not charged with fraud.

They were not charged with misrepresentation or omission or any of that.

As a former federal prosecutor, I want to go on record to say, if I could have had a good faith basis to bring a fraud case in addition to an underlying Section 5 case, I would have, just as a matter of course.

And so, I don’t know how many crypto companies today or in the years past could survive two and a half years and not have one single count of fraud be alleged.

So, I throw that out there. But that doesn’t mean Ripple didn’t do some stuff. right? That doesn’t mean that there isn’t a potential valid claim for a securities violation.

So, what I want to do is, I believe this is the heart of the SEC’s case.

And that is where they claim Ripple engaged in domestic efforts to foster U.S investor appetite for XRP, including offering incentives and paying exchanges to list XRP, saying here’s one million dollars to, I believe, Kraken; here’s five million dollars to Coinbase as incentive to list this token on their website.

So, I’m just going to quickly go through a few pieces of evidence because I want both of you to weigh in on its strength or its weaknesses.

Let’s first pull up 583.

Now, these are just emails where an investor reaches out to Ripple, talking about acquiring XRP in a large amount.

This is presumably an accredited investor who has a hedge fund, and Ripple responds and tells them how they can.

Let’s go to 584.

We’re gonna do this quickly.

Another email about over-the-counter and what’s the easiest way to buy XRP.

These are emails Ripple’s getting back in 2016 or ’17, or even earlier.

Here’s another one where one Ripple employee says to another Ripple employee, “What do I do when I get these calls?” and it says, “I would direct them to ‘How to Buy XRP’ page that’s on our website.”

Let’s go to the next one.

Here are basically chats between Ripple employees talking about the difficulty in New York for New Yorkers to acquire XRP, and they’re discussing this.

The next one is where someone is basically over-the-counter Market maker and Ripple’s answering questions.

So these are emails coming in and Ripple responding to people that have inquired to them how to obtain XRP.

Let’s go to the next exhibit.

There it is, on Ripple’s website, “How to Buy XRP.”

You’ve got Kraken and Bitstamp, or this one, and Ripple shows you where you can buy it.

This is like in 2016 or ’17, prior to the Coinbase listing.

And this is evidence that the SEC is pounding to the judge.

Let’s go to the next one.

Ripple gives reports.

Ripple is a private company; they don’t have to do this, but they give a report.

And then there’s where they say, “Here’s our goals”.

And you see the goals there, which are just general goals.

You’d hear these are our targeted audience, Ripple’s letting the world know: banking, blockchain industry, things of that nature.

Then we got another exhibit.

And Jesse Hynes, an attorney, commented that today timely that he thought that this was transparency needed.

Ripple is a private company, they don’t have to do this, but Ripple went ahead and started producing their XRP market reports every quarter.

Look at that.

They’re letting you know, three billion XRP was released out of the cryptographic escrow, two billion returned to the escrow.

They’re letting you know where the XRP is going and being sold.

Now, of course, Ripple’s saying, “Look how transparent we are.” And I say, “No good deed goes unpunished,” right?

Because all of that is evidence now that the SEC is saying, “Look, Ripple, you’re out there promoting it.”

And there are deposition testimonies I want people to know this, of Brad Garlinghouse, Miguel Vias, where they’re talking about how Ripple needs to establish liquidity for their ODL project.

If you’re going to use ODL (On-Demand Liquidity), you’ve got to have liquidity in the market.

So Ripple is taking steps to make sure that happens.

So you need to get XRP on Coinbase. You need to get XRP on multiple exchanges around the world so that they can access that on-demand liquidity, make their cross-border transactions using XRP as a bridge of different fiat currencies in three to five seconds.

And so, the only way to do that is to make efforts to drive the ecosystem and liquidity.

So, Ripple did offer incentives. I know others have as well, but that was what’s going on in the market.

So, basically, Ripple offered a rebate to Coinbase.

We’ll give you a minimum amount. We’ll guarantee a minimum amount of trading volume.

We’ll give you a discount at the, you know, things of that nature, to basically drive that liquidity.

And so, Ripple, they cite Ripple.

Ripple had tweeted out a petition. They saw a petition that was out there for XRP holders wanting Coinbase to list XRP. Ripple retweeted it.

That’s evidence in the case, right, that they’re being used against them.

There was an internal employee discussion about the online petition to get XRP.

XRP Army is mentioned internally.

There was a message by one Ripple employee that says, “Boy, it’s really great to have an army out there that says things that we probably shouldn’t say as a company.” Right, all of that is evidence.

And I’ll give my thoughts on it…

But um, um, basically I want to first go to Jeremy because, you know, and then I’m gonna go to Marc.

Is this strong evidence or is this just a business doing their thing?

What are your thoughts on it? Because I think the heart of the SEC’s case…

Sorry, Jeremy, go ahead.

Jeremy Hogan:
Yeah, no problem.

First off, from what I reviewed, no smoking guns for the SEC either.

So I didn’t see anything in there, I didn’t see a press release from Ripple, to the general public saying, “Hey, we’re gonna do this and this and that, and that’s going to make the price of XRP go to the moon.”

I didn’t see that.

And legally, I think, you know, you’re looking at the third and fourth prong, which is reasonable expectation of profits based upon the efforts of the promoter, right?

So I think, you know, these things go to that.

But legally, I think they have to be advertised or distributed to the public in general.

And I don’t know how much of the stuff was available or had how much the public had knowledge.

For example, it looks bad that they paid Coinbase five million dollars to list XRP, but, you know, did the general investing public have knowledge of that or not? I don’t know. I don’t think so.

But that being said, I look at these things kind of like how a young lady looks at a young man who’s trying to date her.

What is the woman looking toward?

Woman’s looking at little things that add up to a red flag where she’s going to say, “No, go away. I’m not going to date you.”

So all of these things might be small in and of themselves.

You know, it’s just one email to one private investor, okay?

Not that big a deal.

That’s not gonna win the third and fourth prong for you.

But the judge is looking at these kind of like how a woman will look at a guy who doesn’t pick up his mom’s phone call or doesn’t pull the chair out for her or doesn’t open her door, to be old-fashioned about it.

And when those things reach a certain level, she goes, “You know what? I don’t like this guy. Just throwing me bad vibes.”

And that’s the way I look at how judges will look at these cases.

Is there going to be enough little small things that bug her to where it gets to a point where she’s going to rule against us?

And the bottom line is, and I think people need to understand this is there is enough information out there for the judge to make a reasoned decision for Ripple.

But there’s also enough information out there for to make her a decision for the SEC.

And really, what she’s going to do is she’s going to give it the smell test.

Is this a young man that she thinks she wants to be with for the rest of her life, or is she going to move on and go to the next guy that’s courting her?

And so I think that you have a lot of small little things that the SEC has piled together, and that’ll just be up for the judge to take a look at that guy and see if she likes him or not.

John Deaton:
Marc, before I turn to you, you know, um, I’ve seen SEC enforcement lawyers and heard them read the Ripple complaint that the SEC filed.

Instead, it’s a slam dunk and it’s a great case.

When I read it, I saw a lot of noise like they use non-fraud language in a, I mean, fraud-like language in a non-fraud complaint, and it just had a lot of what I consider noise in it.

And I never viewed it as that great of a complaint.

I thought it was overbroad that XRP holders are all in a common enterprise with each other around the world and Ripple, the theory that the entire XRP ecosystem, that we’re in a common enterprise with exchanges and each other and Ripple.

But you are an enforcement lawyer, right?

I think you said 16 years, you had a hundred people under you.

What’s your honest take when you see this episode?

It’s because I believe a lot of people focus on the sales, but I want to remind the audience that an unregistered offering is enough.
It doesn’t have to actually be a sale, am I right?

And, two, what’s your thoughts?

Marc Fagel:
Yeah, no, I agree with what you’ve been saying.

It’s not a fraud complaint.

They didn’t charge fraud.

but there’s a lot of inflammatory language in there.

Plus, you throw in the fact that they sued two individuals, which is not typically done with registration. You know, strictly registration cases.

I’m speculating. I think the SEC saw this as, I don’t want to say egregious, but more than just an issuer that screwed up.

There was something that upset the staff.

They saw this as a little more than just an error that was made, and they wanted to signal that both through the individual claims and the language they used.

But still, it is a registration case, and as you say, just an offer of securities is enough.

There’s no intent required.

And if I were to look at this, yeah, if this had come across my desk when I was a defense counsel, I could defend this case.

But I think I’d be advising my client that, you know, the odds are they lose.

I think the SEC has the better argument.

It’s a civil case, preponderance of the evidence, 51% wins, and I think they have that.

And I think partly for the reason Jeremy is saying, there is so much out there that maybe each piece doesn’t, isn’t enough.

But I tend to look back.

It’s interesting to me to look at Twitter and the discussions of Howey and people can, what is this prong mean, and get into the weeds and forget the initial part of Howey, which is what’s the purpose of the Howey test in this? What is the economic substance? What is really happening here?
And I think it’s really hard to deny that when Ripple is raising one and a half billion dollars, that’s the SEC allegation, from public investors.

Yes, some people out there are buying it for on-demand liquidity, and that increases over time, and it may be why a secondary market trade is a very different animal.

But the amount of money that’s being raised, I don’t, I think it’s, I don’t know that it’s in good faith to say this is just people buying it because they want XRP to transact business.

These are people buying it and being marketed to because this is something they can buy and profit from as any other investment.

They could have bought Ripple stock, but instead, they buy XRP.

Functionally, it’s the same thing.

That’s the perception that is being created here.

And it’s not an equity interest.

I understand that.

And that causes legal complications, but I think, on balance, what’s really happening here is something is being sold to people for speculative purposes and that sounds a lot like a security.

And I think if you set aside that optics, the SEC’s issues in developing its policy, the fair notice defense, and the individuals just got, did Ripple offer security to the public.

I think they’ve got, the SEC has a strong argument there.

John Deaton:
All right, before I turn to Jeremy, I would do want to say because I call it like it when someone asks me, and it sort of goes to Jeremy’s red flag, you know, where little things, someone asked to me, “John, what’s the worst case or the evidence against Ripple?”

It would be what you talked about because when you compound, when you compare software sales to XRP sales, you’re going to see like 40 million versus 1 billion, right? Like this is how much money they make in revenue for their software to banks or financial institutions.

This is how much money they’ve generated from XRP sales.

I would push back on the speculative thing.

It’s a pet peeve of mine, Marc.

When you read the Howey case, the Howey Court says right after the test that whether or not the nature of the instrument is speculative in nature is immaterial.

And it also says whether the underlying asset has intrinsic value is irrelevant.

And those are two big factors that SEC folks and Gary Gensler focus on.

They focus on speculation, and the tokens don’t have intrinsic value.

The Howey Court said that was immaterial and irrelevant.

But Jeremy, I know you’ve been on time.

What are your thoughts?

What are your thoughts on what Marc said?

Jeremy Hogan:
Well, I mean, I don’t disagree with Marc.

And I haven’t ever said that there’s a zero percent chance the Ripple loses.

I think that, in my opinion, it hasn’t changed since the last video I did, which I really think that there has to be a contract and for, in order for there to be an investment contract.

I think that’s the right result.

And I really think that the fact that XRP or that Ripple had no obligation to these purchases of XRP after it was out in the world.

To me, it’s dispositive.

And I think that would be the right result.

I know that’s probably most attorneys I’ve spoken to don’t think that’s a result that will happen at the trial court level, but it’ll probably be something that maybe an appellate judge would look at if anything.

But I really think that’s problematic for the SEC if the judge can get her mind right.

In fact, I’ll just, in those emails, one of the attorneys that was making comments kind of made that comment that, “Hey, look, even in the Howey test, what happened was some people bought the land, but they didn’t also get the contract for the management of the land. And that’s what the comment says in hidden emails that was not the sale of a security.”

And I think that is what we have here. We have people buying the land and not buying the contract.

Now, I guess the SEC’s argument would be, “Well, you could have an implied contract,” and that’s what really the third and fourth prong of the Howey test is.

But I don’t think any reasonable person looks at an email or the fact that they try to get it listed and say, “Well, you had an obligation to do that for me. You were responsible.”

Because if you sued Ripple and tried to say that, you’d be thrown out of court and maybe sanctioned.

So, I think that’s the proper resolution, in my opinion.

Of course, I’m not the judge, so here I am, just waiting to see like everybody else.

John Deaton:
We’re going to wrap up in a minute, guys.

But Marc, let me ask you.

I think the SEC has a problem with the Common Enterprise, and I’ll tell you why.

First of all, when you look at the SEC’s published digital asset framework that’s on their website, you go to footnote 10, the SEC literally says, “We don’t view Common Enterprise as a distinct element of the Howey case.”

They literally say, “We’re going to ignore the Supreme Court,” in so many words.

But the theory that the SEC had was that Ripple was the Common Enterprise.

But then Ripple got them through requests to admit to admit that there’s no legal interest in Ripple.

There’s no post-sale duty or obligation that Ripple owes XRP holders, absolutely nothing.

Then they got their expert, I can’t say his name, I could, but I’m not going to say the expert’s name, who was going to opine that the Common Enterprise was the entire XRP ecosystem:

Coinbase, John Deaton, Ripple, Jeremy Hogan, who are all in a common Enterprise with each other, vendors, market makers.

This crazy overbroad theory.

Well, XRP holders got involved as well, and that expert wasn’t relied on, and his opinion on what a reasonable XRP purchaser would rely on was excluded by the judge, and so they lost that.

And then finally, in their Summary Judgment papers, they said that XRP itself represents the investment contract and the Common Enterprise.

And so, when I look at applying the law to this case, I struggle with agreeing with you that the SEC has the better argument.

And I look for where are specific, dish-like transactions, forget whether it’s a transaction scheme or contract.

What is the specific, and the only ones you get is individual emails that the public doesn’t know about, the promotion, the Coinbase offering centers that the public doesn’t know about.

So, do you think that it’s enough for Ripple offering Coinbase an incentive or payment to list XRP, that that specific transaction violates the law?

Is that what we’re looking at?

And what are your thoughts on my Common Enterprise comment?

And then we’ll end with Jeremy.

Marc Fagel:
Yeah, and I take it back to what Jeremy was saying that looking at any piece of this in isolation doesn’t seem sufficient.

I think really you do have to look at the broader picture.

It’s not so much the fact that there is payment to have this listed on an exchange.

I think if you look at that in context, that doesn’t sound like something you do if you are selling oranges or selling a product.

Maybe it is.

Maybe you want to develop a use for the product you’re selling.

But I think, in the eyes of the SEC, and looking at everything else, they submit in their motion it does seem like they are trying to create value for this token to sell it to other token holders.

Not so that, it’s one thing to say we’re going to create relationships with banks so you can use XRP for liquidity.

It seems more like we’re trying to create an ability for you to take your token. Wait for it to go up in value. And then, sell it to another interested party.

And that sounds like a security.

That seems to be the economic substance.

But I grant you that there is complexity here.

I think some people from the SEC aren’t confronting this.

And I think that’s one of the biggest things I took away from some of the emails that came out is recognizing this regulatory gap.

And I think they do need to be fair.

There is a regulatory gap because a crypto token – at least the handful I’ll acknowledge – are legitimate.

I’m a skeptic.

I think a lot aren’t.

But those that are legitimate.

There is this sort of hybrid nature.

You can buy it as an investment because you think you can save it and then use it to finance your children’s college fund.

Or you can buy it because it offers you online liquidity or some functionality of the underlying blockchain.

And that’s different.

That is a new phenomenon.

And I think that’s where the law is unsettled.

And I think that’s why you see the SEC throwing out language that pivots from brief to brief because they’re not really sure what’s going to fly.

They are throwing a lot of things at the wall to see what sticks.

John Deaton:
Jeremy, I’m going to ask you your final thoughts and if you can make a prediction.

Because everybody’s there.

XRP holders want to know, “What’s this mean?” “What’s this mean?”

No one can wait.

And then, I’ll ask Marc to give us his prediction, if he’s willing.

Go ahead, Jeremy.






Jeremy Hogan:

So my initial instinct when I knew this question was coming was to say, “I think that the judge is going to split the baby at some level and say sales from maybe when the ODL came into existence on or not sales.”

Then I kind of thought, “Wait. No, that’s maybe a little bit of an easy way I’m gonna go, maybe. Oh, it’s easy. Just we just like talking on the internet. But say that.”

I think Judge Torres is brave enough to say, “You know what. there’s not a lot of case authority out there on it, but I’m gonna say there has to be a contract to have an investment contract.”

And I’m gonna go with a 39.967 certainty on that.






John Deaton:
Marc, when you say the SEC has a stronger case, does that mean SEC motion for summary granted 1.3 billion dollars discouraged?

Or does that mean she parses it out/splits the baby sort of rationale that Jeremy’s talking about?


それとも、それはジェレミーが話している「Split the baby」のような理論で、彼女がそれを分割するということでしょうか?

Marc Fagel:

I think there’s a difference between what I think is the stronger case legally and what I think is going to happen.

I think that if you had taken out some of the optics, some of the things we had talked about previously in terms of fair notice and so forth.

I think just strictly on the law of section five, I think the better answer is for the court to rule as a matter of law that the offering violated section five.

That’s what the case is about.

I don’t think the individuals, I don’t think the SEC is successful as to the individuals.

But I think as to Ripple, I think as a matter of law, the SEC wins.

What do I think is really going to happen?

I’m more where Jeremy is.

I’d actually go beyond that.

I think the SEC loses this case on Summary Judgment.

I think the easier thing for this judge to do is put it all in front of a jury, or mostly in front of a jury.

I think the interim decision she made just on unsealing this part of the record wouldn’t have been necessary if she wasn’t planning to put at least some of this in front of a jury.

And I suspect that’s probably where this goes.

And I don’t think the SEC is likely to win this case in front of a jury either because of the optics or because of complexity.

The SEC, on a case like this, does not have a great track record in front of a jury.
















John Deaton:
Yeah, no, that’s great.

I would point out too.

This could just be boiler plate that the judge used, but when she unsealed the documents she did say, “whether or not I rule the Hinman doc emails admissible”, implying that’s for another day.

Now obviously, she’d only be ruling on the admissibility if there was a jury.

And I’ve always said that people underestimated the chances of a jury.

Whether it’s to the Common Enterprise prong that I talked about or whether it is to the reasonable expectation of profit, it’s hard to be in a Common Enterprise or rely on the efforts of a company that you are oblivious exists.

I can tell you, when many XRP holders, they just bought XRP because it was the third largest crypto and it was cheaper than Bitcoin.

Let’s just be honest, that’s a fact.

My daughter was one of them who just said, “I’m buying a Bitcoin and splitting five grand and buying half of ETH and XRP because I hear my dad talk about this new asset class.”

She’d never heard of even Vitalik Buterin or Satoshi Nakamoto, let alone Brad Garlinghouse or Ripple.

And so, I agree with you.

I think that there’s a really strong likelihood that we see the SEC gets denied their motion for Summary Judgment as written for sure.

I’m very confident saying that.

But that doesn’t mean I’m confident that Ripple is going to win.

I can see their Summary Judgment being denied.

And she leaves at least one or two tribal issues out there.

Because I don’t see enough specific transaction evidence that’s in there unless you’re just gonna go with the offering like Ripple offered this token in general as a via section 5 violation and so on.

Any final thoughts from either one of you?




















Jeremy Hogan:
Well, I’m just gonna say…

The problem I have with a trial on the section 5 violation is if you’re gonna force the judge to say “These are what… Hey, Jury. These are the issues. Here’s a verdict form. Here is other issues you need to decide.”

What is in there in that verdict form?

I just can’t imagine.

On a section 5 violation, what the judge would be asking the jury to rule on?





John Deaton:
So, your point, Jeremy, to be clear for people listening, is that she says that during this period of time Ripple violated section five, but the fair notice issue goes to the jury.

Is that what you’re saying?



Jeremy Hogan:
Yeah, that’s how I think.

It’s more likely she would rule on the section 5 violation.

And what I’m pointing out is the reason I think that is she has to rule on it because what disputed issue of fact is there for a jury to make a decision on as far as the section 5 violation.

I mean, everyone’s admitting the press releases that Ripple sent out.

They’re not denying that they sent those out.

It’s just what’s the legal implication.

And so, when I think about a jury trial, I’m thinking what’s the legal fact that a jury is going to have to make a decision on and I can’t think of one.

And that’s why I think she’s got to rule on it.

Although, that being said, I had a case last year which was a straight issue of legal fact and the judge just punted on it and sent it to the jury.

We literally had attorneys in there arguing points of law to a jury.

It was ridiculous.

We had an expert attorney who was being crossed by the defense attorney and it just doesn’t go well.

But I could see how she could do that.

I just don’t know what the jury would be asking to make a decision on.


















John Deaton:
Marc, any final thoughts before we sign off?


Marc Fagel:
Um, I’m reading the news as eagerly as all of you.

And I have the benefit of seeing both sides of it.

So for me, it’s a win-win.

If the SEC wins, I think that’s ultimately better for investors.

If they lose, I think it might be a better use of the SEC resources to say “Maybe this isn’t a space we should be in and let’s go focus on something else”.



ですから、それは私にとっては Win-Win です。



John Deaton:
All right.

If you were to sign off right now and were to play some music, what are you going to play?



Marc Fagel:
I’ve been staring at my Sgt. Pepper’s over my head for the last hour, so I think I’m going for some Beatles.


John Deaton:
Nice. Alright.


Jeremy Hogan:
There you go.


John Deaton:
Thank you so much.

I appreciate you taking the time.

Look forward to seeing you on here, on Twitter. Alright.




Marc Fagel:


Jeremy Hogan:
Thanks John.


John Deaton:
For everyone out there, I know the show was longer than normal but hopefully you enjoyed it.

Everyone, have a great night.

See you next week.