Deaton Reacts as SEC Criticizes Ripple Ruling Again During Latest Coinbase Hearing

Attorney John Deaton says the SEC classified Ripple’s XRP sales under several categories, emphasizing that Judge Analisa Torres only ruled accordingly.

The cryptocurrency community has continued to comment on the just-concluded hearing of Coinbase’s motion to dismiss the SEC’s lawsuit.

SEC Criticizes Judge Torres Ruling

As expected, the SEC did not disappoint XRP community members as it criticized Judge Analisa Torres’ summary judgment decision in the Ripple case.

In a tweet yesterday, Fox Business journalist Eleanor Terrett noted that the SEC’s lawyers commented on the merits of Judge Torres’ decision, especially as she ruled differently on Ripple’s programmatic sales on exchanges and institutional sales.

“Where we disagree with Judge Torres is that there’s no need to create two categories of people because whether you’re sophisticated or not, at the end of the day, you’re still buying the same token,” Terrett tweeted, citing comments from SEC’s lawyers.

Deaton Reacts

Terrett’s tweet sparked reactions from crypto enthusiasts, including XRP community attorney John Deaton.

Reacting to Terrett’s tweet, Attorney Deaton pointed out that Judge Torres only followed the complaint and argument made by the Securities and Exchange Commission in the lawsuit.

What Judge Torres did was follow the Complaint and the argument made by the SEC. The SEC divided Ripple’s sales of XRP into several categories: 1) institutional sales to sophisticated investors like Banks, Hedge Funds, VC’s, etc; 2) programmatic sales through exchanges: and 3)… https://t.co/tDO7Cgqxv0

— John E Deaton (@JohnEDeaton1) January 17, 2024

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According to Deaton, the SEC divided Ripple’s sales into different categories. The first category in the SEC’s complaint focused on Ripple’s institutional sales to sophisticated investors, like Banks, Venture Capitalists (VCs), and Hedge Funds.

In the second category, the SEC considered Ripple’s programmatic sales through crypto exchanges to be securities.

Lastly, the regulatory agency alleged that the company’s other distributions of XRP, including giveaways, donations to charity organizations, and XRP paid to Ripple employees, developers, and contractors, were investment contracts.

Attorney Deaton, who represents thousands of XRP holders in the Ripple lawsuit, said the SEC made the above-mentioned arguments, adding that the judge ruled accordingly.

Terra Judge Backs SEC Argument

It can be recalled that Judge Torres issued the Ripple summary judgment in July 2023. While she found that Ripple violated the law via its direct past institutional sales of XRP, she declared that the company’s programmatic sales through exchanges and other distributions were not securities.

The SEC’s concerns about Judge Torres’ decision were also backed by comments from Judge Jed Rakoff, who presided over the SEC v. Terra lawsuit.

Judge Rakoff disagreed with Judge Torres’ reasoning in the Ripple case, criticizing her distinction between institutional and retail sales of XRP. The Terra judge stated that the Howey test, a longstanding security test in the U.S., did not distinguish between buyers using the origin of their coins.

Unsatisfied with Judge Torres’ ruling, the SEC moved to certify an interlocutory appeal to enable it to challenge the decision in the U.S. Court of Appeals for the Second Circuit.

However, Judge Torres denied the SEC’s interlocutory appeal bid, ordering the regulator to wait until all pending issues are resolved.

SEC May Appeal Ripple Victory

The SEC’s recent argument in Coinbase’s hearing suggests that the securities agency may move to appeal the Ripple decision once Judge Torres issues her final judgment.

In the meantime, the Ripple lawsuit is currently in the discovery phase of the remedies litigation. The SEC recently filed a motion to compel Ripple to hand over its audited financial statements from 2022 to 2023 and contracts related to its institutional sales of XRP.

The commission also wants the court to order Ripple to disclose the proceeds of its institutional sales since the complaint was filed. Ripple is expected to file its response to the motion by tomorrow, January 19.

With the last motion with respect to remedies expected to be filed on April 29, several legal experts have predicted that the judge might issue her decision in early summer.

Once Judge Torres issues her final judgment, the SEC will decide whether to file a full appeal at the Second Circuit or agree on a settlement with the crypto payments company.