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Unreported 2018 XRP Memo Reopens Old Wounds as Security Debates Flare

The crypto industry is buzzing with increased excitement after John E. Deaton, a notable pro-XRP lawyer and enthusiast, revealed the existence of an unpublished XRP letter from years ago. 

Bill Morgan, a lawyer and digital analyst, responded to a statement by a fellow X user, Sandy Seth, on August 27. In this response, Seth questioned Morgan if the SEC had given a document indicating that XRP did not meet the Howey Test.  The query set off a chain reaction that culminated in disagreements and discussions regarding the Ripple issue, forcing Deaton to release details about the memo’s contents. 

Although a strong supporter of Ripple’s victory before the SEC, Deaton first denied suggestions that the memo implied XRP was a security. He instead stated that the memo’s contents were not available to the public. Still, he did divulge that it was authored by the United States Securities and Exchange Commission’s (SEC) enforcement lawyers. 

Deaton also argued that the memo was “inconclusive,” citing that if it confirmed that XRP constituted security, the SEC would not sit on it and instead take appropriate legal action against Ripple. 

On the other hand, the lawyer alleged that the SEC may have used illegal means to advance the Ripple case, revealing that notable crypto critic John Reed Stark has also stated that a proper inquiry should be conducted. 

“I believe Ripple will ultimately lose, but I also believe that if there were unlawful acts by an SEC official, then the IG should investigate,” Reed previously remarked in an X post. 

Deaton contended that the SEC had been aware of Ripple’s operations for years. He said numerous prominent exchanges and crypto businesses had accepted XRP as payment or listed the cryptocurrency on their platform, proving it was not a security. 

“Over 1700 vendors, including Time Magazine, accepted XRP as payment.” Also in 2019, the FSOC released its annual report, highlighting XRP alongside Bitcoin, Ether, and Litecoin, claiming that the market valuation of these “virtual currencies” was significantly increasing. “Every financial leader in the United States Government, including Jay Clayton, signed that report,” Deaton added. 

“Also, in 2019, MoneyGram filed a form with the SEC disclosing it would be using XRP in its cross-border payments business,” he continued. Deaton also revealed that the US Government authorized an independent audit in 2015 to track XRP sales and audit all sales. The audit operations lasted years, providing the authorities with three years’ worth of XRP sales data and information. 

He went on to say that the SEC issued a regulatory framework for digital assets in 2019 that indicated that if a token works as a virtual currency and can be easily used for “payments or as a substitute for fiat currency,” it does not meet the parameters of the Howey test.

The Howey test establishes whether a financial instrument is a security. Deaton believes that the token ticked all the boxes in 2019 to avoid being classified as a security. 

Overall, the issue between Ripple and the US Securities and Exchange Commission is still ongoing, as the regulator filed an interlocutory appeal to reassess Judge Analisa Torres’ finding that programmatic XRP sales do not constitute securities.

 

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