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SEC vs. Ripple: There’s Something Happening Here

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TRANSCRIPTION FROM VIDEO:

 Hello and welcome to Legal Briefs. This is the  XRP connect the dots edition and I’m not quite sure how I’m going to approach this video but allow me to start with this.. watch it all please – to get you in the mood.

Now that you’re hopefully in the mood – make yourself comfortable and I will take you to places you have never been before. I for one can’t wait.

Welcome back and and first I have to give you our prophylactic disclaimer: Don’t take anything I say as legal and certainly today not as financial advice. If you need financial advice – hold a séance and ask this gentleman:

Bonus points if you can name him in the comments – make sure you type it with an “invisible hand.” Hint hint.

Okay, what I want to lay out for you today is that something is very very off in this SEC v. Ripple litigation and it’s kind of subtle but very glaring to me because – remember, I see everything but know nothing. And yes, it means that something is happening here.

To start I have to take you back to early June and the battle back then over whether the SEC had to produce certain documents related to its opinions on whether Ether and Bitcoin and XRP were a security. And that issue came to a very contentious hearing in front of the Judge all the way back on April 6 of this year and this is what the Judge ORDERED:

Looking at pg 51 of the transcript the judge said:

“I am going to grant, in large part, the defendant’s motion. I think that the discovery related to Bitcoin and Ether is relevant. I think it is relevant to the Court’s eventual analysis with respect to the Howey factors, … I also think it is relevant to the fair notice defense that Ripple is raising.”

Later, the issue of those documents came up in a June 14 letter to the Judge where it seemed the SEC

“promised to substantially complete its production of the internal documents before July 2.

And if you were listening to the court hearing on July 15 you might recall the Ripple lawyer at the very end of the hearing complain to the Judge that the SEC had not produced ONE single internal document as ordered.  And the Judge said something to the effect that they should file a brief with her the next week and she would rule on it. Now that would have been last week and guess what… nothing was filed. Nothing.  Was this issue suddenly resolved out of thin air? Hmm..

The SEC is raising a privilege defense to producing these documents and so they have to give Ripple what’s called a Privilege Log and it’s basically a list of all the documents that the SEC is saying they don’t have to give to Ripple. And I for one refuse to be believe that Ripple isn’t going to think that at least one of those documents should be given to them.  But yet, we haven’t seen the motion to compel the production that the Judge requested.  And it’s not because there’s a lot of time left to do it. Believe it or not, there’s only one month of fact discovery left. So suddenly this humongous area of contention disappears in a puff of smoke?  Hmmm..

Hmmm.

So, next, we had the deposition of former Director Hinman. The SEC strongly opposed the deposition in its entirety and requested the Judge quash the deposition – which is a cool way of saying “stop” it.

Looking right at the first sentence:

“Plaintiff Securities and Exchange Commission (“SEC”) respectfully requests a conference with the Court to seek an order quashing the deposition subpoena directed to William H. Hinman.”

So, the matter was briefed and the hearing was held on the deposition and something very strange jumped out at me during that hearing on July 15

And that was it. It was a “tell” during the hearing that the SEC was desperate to NOT have the Hinman deposition take place.

And also recall how far apart the parties were on what the Deliberative Privilege protected Hinman from questioning.  The SEC basically argued that EVERYTHING Hinman said outside of public speeches was privileged and Ripple argued that almost nothing was privileged.  The parties were basically a Grand canyon apart.

So imagine my surprise when just 4 days later I see this letter

and in paragraph 2:

“We have reached an understanding pursuant to which the Defendants may examine Mr. Hinman without triggering a privilege objection from the SEC.”

Really?  The Grand Canyon was crossed just like that? Hmmm…

And what happened a couple days before that miraculous agreement?  Something I’ve NEVER seen in a litigation before, 2 Commissioners of the SEC came out arguing, essentially, that Ripple’s Fair Notice Defense was valid – that market participants do not have Fair Notice in the crypto space.

Hmmm…

So, now it is July 29 as we film this and the deposition of Mr. Hinman was supposed to have taken place on July 26.  Having watched this litigation from the beginning and with the stakes as high as they are, I REFUSE  to believe that former Director Hinman – with all that is on the line – marched into the conference room on the 26th and answered all the questions posed to him by Ripple’s lawyers. I refuse to believe that. I have small claims cases where I’ve sued for $10,000 where I’ve fought tooth and nail over one single question that the deponent didn’t answer fully under a privilege objection.

Maybe the $20 million Ripple legal team, with more lawyers than most soccer teams have players, needs more than 2 days to brief the issue when it is under a discovery cut-off of around a month?  Possible, but not likely to me.

But all of these recent things are “Hmmms” and very interesting but we can’t really draw any conclusions from them other than they are really just not very likely to take happen in a case like this.

But you came here for my rampant speculation and conclusions and I, as always, aim to please.  So I am going to speculate two things for your viewing pleasure.

First, I don’t think the deposition of Director Hinman took place this last Monday. If it had, where is the transcript to be filed under seal for an in-camera review by the Judge and where is motion to compel Hinman to answer certain questions? Is it possible that the SEC and Ripple attorneys suddenly became little lawyer angels and agreed on EVERYTHING last week so they wouldn’t have to burden the Judge with their bickering?

Nope, trust me, that lawyer doesn’t really exist. Which leads me to conclude the deposition never took place .  That’s the first conclusion – which then leads me to my last point which is one that might have escaped mere mortals – but I was on another plane of existence when I saw this and what it meant so stay with me for the next point.

Recall that shortly, very shortly after the Commissioner’s statement basically supporting Ripple, that the individual Defendants filed the Statement with the Court along with an explanatory letter on July 19. Then Ripple turned around the VERY NEXT DAY on July 20 and filed basically the same thing. and WHY did it file the statement?

Look at paragraph 2:

“to ensure that the record on the motion to strike is complete, Ripple requests that the Court consider the 2 commissioner’s statement to the Court in support of Ripple’s Fair Notice Defense.”

At that point, the SEC motion to Strike Ripple’s Fair Notice Defense was fully briefed – the SEC filed the motion, Ripple replied, and the SEC replied to the reply. So the motion is fully briefed and what that means  in Federal Court is that after the issue is fully briefed  a judge can rule on it and judge Torres can rule on the motion at ANY TIME without further notice so they got it in right away.

Then, the next day on the 21st we saw the SEC respond to BOTH the individual defendants and Ripple in one response letter. And then on the 23rd the individual Defendants filed a reply to the SEC – so now the Individual Defendants had fully briefed the issue and their record was complete.

And on Twitter on July 23 I said “Expect to see the Ripple reply shortly.”

And then it was July 24 and then 25 and 26 and today it’s the 29th and … no reply. RIPPLE NEVER REPLIED TO THE SEC’S BRIEF.  Again, you have some of the best securities lawyer in the country working for Ripple and this is a  reply that IS time sensitive and IT STILL HASN”T BEEN FILED.  Ripple has not replied and has left unaddressed the issues raised in the SEC’s reply of July 21st.

Wow. Did Ripple blow it? Do Ripple’s 23 lawyers need more than 9 days to draft a 3 page reply brief?  OR… wait for it.

OR is it possible or yes even likely that Ripple didn’t bother to file a response to the SEC  because IT DIDN”t NEED to. And Ripple didn’t need to file a reply because there were serious discussions regarding se..

Really? It’s the big crescendo reveal of my video – of maybe all my XRP videos and I get shhhd by the Old Spice guy? I was just saying that everything leading up to this last week points to this case being very close to se

Ok, fine.  Are there other possible explanations?  Yes – of course.  One of the main counsel could be very sick – knock on wood and the case could be stayed. That’s just one thing that comes to mind and there could be a hundred others but my best guess and what I think is most likely is that the case is going to se…

Baby Yoda – so cool.

And how will you know if I’m just WRONG (doubtful) or perhaps one of the other possible scenarios has passed?  Look for something to be filed in the case by this Friday. If nothing is filed this Friday – my guess is that …well… let me just say “There’s something happening here but what it is ain’t exactly clear.” And with that I’ve said enough.

The one thing I’ve learned in 50 years is that time reveals ALL. Be patient and you will see. Thanks for watching.

If I’m really wrong on this one you want to  start a garage band instead of the Youtube thing?

Thien-Vu Hogan
Thien-Vu Hogan
Attorney Thien-Vu Hogan is the founding and managing partner of Hogan & Hogan.