Deaton Dismisses Chia Network’s COO Claims That SEC Informed Ripple Execs About XRP Being A Security

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Deaton Shares Facts Proving SEC Never Informed Ripple Execs That XRP Was A Security.

Following the filings of summary judgment motions, opposition, and replies, the XRP community eagerly anticipates U.S. judge Analisa Torres to rule on the lawsuit to determine whether the crypto asset is a security. While the XRP community hopes Judge Torres gives a ruling in Ripple’s favor, some crypto stakeholders believe Ripple would lose the case.

Chia Network COO Says, Ripple Will Lose

Chia Network’s COO Gene Hoffman is one of the crypto stakeholders who expect Ripple to lose its case against the Securities and Exchange Commission. In a recent tweet, Hoffman notified XRP holders that the former director of the SEC’s Division of Corporate Finance, William Hinman, informed Ripple executives that XRP was a security.

He shared a screenshot of the SEC’s claim in the recently-filed summary judgment reply while urging the XRP holders to prepare for “the post Ripple loss future.”

Did you know that Bill Hinman told Ripple leadership that XRP was a security in his opinion in 2019? Neither did I… Prepare for the post Ripple SEC loss future https://t.co/MmD79MRL5l pic.twitter.com/yykUsTVSfY

— Gene Hoffman hoffmang.xch 🌱 (@hoffmang) December 5, 2022

Deaton’s Reaction

Crypto Law founder and pro-Ripple lawyer attorney John Deaton responded to Hoffman’s statement, saying he would place the comment in proper context using “facts.” 

Deaton said two months after the controversial June 2018 Hinman speech, where the former SEC exec declared ETH and Bitcoin as non-security, Ripple CEO Brad Garlinghouse, and CTO David Schwartz met with former SEC chair Jay Clayton and Hinman to also get clear regulation for XRP. 

He added that on June 13, 2018 (a day before Hinman’s controversial speech), SEC enforcement lawyers performed a detailed analysis on XRP, applying the Howey test to determine whether the crypto asset was security.

According to attorney Deaton, if the SEC were certain that XRP was a security, Clayton and Hinman would have informed Ripple execs. However, Deaton said that the agency never told Garlinghouse and Schwartz that the SEC Enforcement lawyers found XRP to be a security. 

So this meeting between Clayton & Hinman w/ @bgarlinghouse & @JoelKatz was a PERFECT OPPORTUNITY to advise Ripple that #XRP was a security – assuming SEC enforcement lawyers had concluded as much.

Clayton & Hinman DID NOT advise the Ripple executives that #XRP was a security.

— John E Deaton (@JohnEDeaton1) December 7, 2022

Deaton said if the SEC had concluded that XRP was a security, the agency’s enforcement division would have recommended a cease and desist letter be filed against Ripple or an enforcement action against the leading blockchain company. He added that the SEC would not have sat back for over a year after concluding XRP was a security and watched Ripple execs sell “illegal securities” to the public.

Deaton Shares More Facts

Deaton further says the SEC would have turned over the XRP memo during discovery to give the securities regulators an edge in the lawsuit.

“If the 2018 XRP Memo had concluded XRP was clearly a security, the SEC would’ve turned it over in discovery just like it did the August 2018 meeting notes. If theconcluded XRP was a security the SEC would’ve handed it over and argued it gave Ripple plenty of time to fix it.”

In addition, attorney Deaton said that in January 2019, Coinbase and its security lawyers met with Hinman about the exchange’s intention to list XRP.

Coinbase’s lawyers informed Hinman and the SEC that they ran #XRP through Coinbase’s Framework for determining whether an asset meets the definition of a security.

— John E Deaton (@JohnEDeaton1) December 7, 2022

Notably, the SEC did not disagree with Coinbase, and the exchange listed and promoted the widespread adoption of XRP on February 25, 2019. 

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