Lawyer Jeremy Hogan Discusses: SEC v. Ripple Case Hinges on THIS. Cameos, Transcripts and Analysis!

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Hello, this is attorney Jeremy Hogan and welcome to another Crypto edition of Legal Briefs and today we are going to discuss the importance of the Judge in cases like the Ripple lawsuit.  We will look at some actual court transcripts and see what we can find out  AND   I have a special guest today, my Father, who is a retired lawyer AND Judge and who will tell us about a case he heard as Judge.  And of course, we will approach that interview with all due respect for our elders.

I have got my  hands on a transcript of the pre-trial conference in the Kik Interactive case, which you may recall is similar-ish to the Ripple case except Kik Interactive lost, so I want to show you what the pre-trial hearing from THAT case was like with THAT Judge and then I want to show you a transcript from a hearing that the actual Judge in the Ripple case Judge Soto was involved in, and why I think Ripple will feel much better with her as Judge. And of course we’ll hear from my Dad as well so you get a feel of some of the difficulties Judges can have approaching complicated cases like the Ripple case.

First a quick Disclaimer: Do not take anything I say as legal or financial advice.  You are MUCH better off asking this guy about crypto-stuff.

Anyone recognize him?  I watch a lot of Youtube channels at night while I’m riding the stationary bike.  Look at my subscriptions and its funny, you know I have kids – it’s all crytpo, – Digital Investor, Digital Perspectives, Crypto Eri,  investing channels, law channels and then… PJ Masks. 

And on that note  I want to tell you about a bullet that Ripple dodged in this case and I am referring to the Kik Interactive case and specifically the Judge.

And it’s vital you understand this one thing because I see a lot of discussion online and in the actual Ripple pleadings about how the SEC waited 8 years before the lawsuit, lack of fair notice, sales of XRP being outside of the U.S. jurisdiction, and I’ve talked about many of those things and they ARE important.  But what I think gets lost in those discussion sometimes is the fact that Judges are people and people… are people, even Judges are not just legal machines.  They get things wrong, they get things right, they bend the rules where they think appropriate.

Just a quick personal story – I had a hearing yesterday morning, I was asking for an extension of time for something from the Judge and it wasn’t a big deal but TECHNICALLY I should have filed an affidavit and I hadn’t done that but understand I had been in front of this Judge many times – I tried a case in front of her 2 years ago and when the Judge asked if I had filed an affidavit I told her I hadn’t but half-joking I said she could swear me in and I could tell her x,y,z under oath to satisfy the Rule but the Judge knows me and she said “no” that’s ok and she granted the extension.  Point being, Judges are people – I mean , they are lawyer-people, but still people.

And you also have to keep in mind the breadth of knowledge a Judge has to have.  My practice is fairly broad – I practice in many different areas of law.  Most attorneys practice in a very narrow area of law.  Most securities lawyers?  That’s ALL they do – securities law.  Because there is just so much to know.  But Judges for the most part are different – the Judge on the Ripple case has to understand Federal criminal law, trademarks, civil rights law, EVERYTHING AND also under securities law.  And that is a HARD thing to do.

And as promised, I suckered my Dad, Jerry Hogan, into coming over last weekend and telling us a quick story about when he was a Judge and I think this story kind of sums up how it can be to be a Judge.

My Dad’s awesome and knows more about law than I’ll ever know – but even then when presented with a case that simply defies an equitable legal disposition he did what most GOOD judges do – he leaned on the parties to come up with an answer.  That happens every day in Court.

And so the next thing to understand is that if the Judge can’t or doesn’t make that happen, you sometimes you get a Judge who JUST DOES NOT WANT TO HEAR IT except at a very basic level, and that’s sometimes the truth of the matter that a lot of people don’t understand.  When you are there at the hearing in front of the Judge it’s just you trying to explain and persuade and get another human being to agree with you.  And sometimes you get a Judge and you can make a legal argument that puts Perry Mason to shame – I mean BRILLIANT argument and … it JUST DOESN”T WORK and the Judge is just going to stick with what he knows and I think that something that a lot of pundits can overlook. 

So if I was Ripple’s lawyer, I would spend a GOOD amount of time researching my Judge and tailoring my argument to her.  And I’ve done SOME preliminary research so you can see why I feel comfortable with the Ripple Judge and how I would approach the issues with her.

I was able to get a copy of transcripts from two hearings in the Kik Interactive case that Kik ended up losing.  The Judge was Judge Alvin Hellerstein  (which is an awesome name) But ..Ripple is lucky this isn’t THEIR Judge.  Listen to this:

The SEC attorney’s name was Mr. Schlegelmilch so I will just refer to him as SEC attorney.

So, Judge Hellerstein, I think he’s retired now, was in his early 80s when he heard the the Kik Interactive case.  You can see he knew the word crypto currency – probably because he had done some quick research the morning of the hearing – but what you can tell from the rest of the interchange is that THE JUDGE HAS NO CLUE and PROBABLY WILL NEVER UNDERSTAND what XRP is.  And good luck explaining to an 82 year old man what a decentralized ledger is and how because it’s decentralized, there can be no investment contract.  I don’t mean any offense by that as the Judge seemed fair and no-nonsense but I don’t think this is the Judge you want if you wanted a nuanced application of the facts to the law.

And that is why when I sat in on the Ripple pre-trial conference I listened CLOSELY to what the JUDGE said.  And here is what I noticed. 

Nothing gets by me.

So, let’s contrast the Judge’s statements from the Kik Interactive case with those from Judge Torres.  Judge Torres knows that the SEC uses the term “Digital Asset” and that Ripple uses “Crypto Currency” and the only reason she would use both terms is to show impartiality.  But that ALSO means she understands already, this early in the case, why the terms used are important and what the difference is between them.  That suggests to me a sophistication and understanding of what the case is all about.

But let’s go back to the Kik Interactive case and ask what did Judge Hellerstein know if he didn’t know what a blockchain was?  The Howey test – the Howey test is something he’d ruled on before, many times.  And remember how I said in an earlier Vlog about how the SEC has been building case law in order to declare almost EVERY crypto coin a security?  Listen to this exchange and what the Judge asks?

So, as I told you in my law vlog, the SEC spent 2017, 18, 19 compiling this case authority so WHEN THE JUDGE ASKED THE QUESTION: “Are there opinions?”  (because really guys I don’t understand what this block chain , decentralized stuff is all about so I want to see what other Judges did) the SEC attorney was ready with 6 or 7 cases he could site as precedent.

So, what I could surmise from my review was that Kik was probably dead in the water.  This Judge was either not capable or was not going to be flexible enough to make nuanced interpretations of law that an emerging technology case would require and therefore KIK lost.

So, what do we see with the Judge in the Ripple lawsuit?  Our Judge is Judge Annalisa Torres and she is what I would say is a career Judge – she was only in private practice for 4 years.  She’s a former teacher, like me, and a second generation lawyer – her father was also a lawyer – like me also.  That’s where our similarities end – she went to Harvard, which means she is very smart, and she is in her early 60s and was nominated to the New York Federal Court by President Obama in 2012.  Here she is.

She puts the “P” in petite but in that brain possibly lies the fate of the crypto world.

But let me tell you why I feel good about her.  Obviously the fact that Judge Hellerstein, who she used to attend meetings and go to lunches with, ruled against Kik Interactive is not good but I found something that makes me feel good about her. I found a transcript of Judge Torres which probably came about from a Civil rights lawsuit regarding conditions in a New York prison – probably a federal 1983 violation.

And apparently there was a hearing one day and the inmate witnesses were not brought from prison to the Court-room but Judge Torres took the lawyers and a court reporter with her TO THE PRISON itself so she could see the conditions and interview the prisoners herself.  That’s not necessary – the Judge could’ve had the prisoners brought in and that surely would’ve been easier .  I’ve been involved with a couple criminal cases and visiting Prison is not fun, a lot of prisoners have mental health issues, it’s not something I would ever look forward to but Judge Torres went to see herself and here’s a sample of how that went.

And she must’ve interviewed 10 inmates like that until late in the evening – the trasnscript ends at 7pm at night.

So, what that tells me is that this Judge has a curiosity, wants to get at the truth of a situation, and is willing to think outside the box.  This jibes with the fact that she’s already up-to-speed enough to understand the nuance between a digital asset and crypto-currency.

But perhaps most important I really see a humanity in this Judge from what she did while visiting prison to some of her other opinions.  That is an attribute you want to see when you are arguing promissory estoppel, fair notice, and any equitable defense really, and I am sure that the Ripple has done their research and knows all about their Judge and are tailoring their arguments to show her how  a security designation at this juncture will harm  thousands and thousands of XRP holders. 

That is the KEY to me – this Judge needs to understand that this case is not only about Ripple the company or about multi millionaire company CEOs but about the potential devastating impact an adverse ruling would have on tens of thousands of people who are and have been holders of XRP for years – who have put some of their life savings into XRP.  If they can get her to understand that – we have a Judge who is willing to think past the Howey test and get to the truth of the matter and THAT is how you win this case.

Thanks again for watching and remember no matter how high up on a pedestal that person is sitting in front of you – they are only human and they put their pants on just like you, one leg at a time.

Jeremy Hogan
Jeremy Hogan
Attorney Jeremy Hogan is a partner at Hogan & Hogan.