digest
Short Summary
Main recommendation: Attorney Jeremy Hogan predicts that an SEC v. Ripple settlement would most likely involve a civil penalty limited to pre-lawsuit dates, no disgorgement of profits to XRP purchasers, and limits on XRP sales from escrow, which would give exchanges enough confidence to relist XRP. He speculates this would leave XRP clear of securities violations, potentially making Ripple the first crypto company fully cleared by the SEC. He frames these points as conjecture based on past settlements, not as legal advice.
Key Points
- Hogan bases his projection on the Kik Interactive consent judgment, which included a $5 million penalty, an injunction against future violations, and 45 days' notice before further Kin coin sales, but no finding that the Kin coin itself is a security.
- Telegram's case is contrasted with Kik's: Telegram had its monies disgorged, about $1.2 billion, with a fund set up for purchasers to recover some investments.
- Disgorgement to investors is unlikely in his view because XRP has changed hands millions of times over the nine years since the lawsuit began, making it impossible to fairly identify who to repay.
- Ripple must avoid a penalty large enough to bankrupt the company, and Hogan notes the complaint says Ripple sold about $1.38 billion of XRP between 2013 and the lawsuit.
- Hogan argues the SEC's lawsuit covering current and future sales would be ended by dismissal, while exchanges would need terms making clear that penalties apply only through a set date.
- Hogan notes Ripple's ODL customers are banks and money transfer services, not exchanges or the public, so he argues this puts Ripple in a good position to limit escrow sales to accredited investors or corporations.
Details Worth Noting
- Concrete instructions: The video gives no step-by-step actions for a viewer to take. The only actionable content is the advice to crypto companies to avoid unregistered offerings, as reflected in the SEC's use of lawsuits and private opinion letters telling companies not to proceed with certain sales, plus the advice that companies in Ripple's position should structure any settlement with clear date limits and sales restrictions.
- The Howey test, from SEC v. Howey, determines whether something is a security, and it arose from the sale of orange groves in Howey-in-the-Hills, Florida.
- The SEC filed 17 crypto-related lawsuits in 2020, according to the chart shown, and most defendants settled or ran out of funds rather than litigating.
- Hogan suggests Ripple could agree to pay a percentage of sales of escrowed XRP or accept confiscation of some escrowed XRP, though he calls this a fringe idea.
- In a quarter reported in a May 2021 Cointelegraph article, Ripple released 3 billion XRP from escrow and returned 2.7 billion XRP to new escrow contracts.
Bottom Line
Hogan's projection is that a settlement would protect Ripple's business and XRP's market access while limiting new sales, but it rests on his reading of prior cases and his conjecture rather than on any actual court outcome.
