You want to have great facts because appellate courts, you know very much, will pick apart bad facts and use it to make bad law, or will not even give you the answer you on on a legal question. If there are bad facts, and so that's what the sec has here, you know, it's better to take an FTX or a do quon case like that up to up to an appeal, and that would just be a lot safer.
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Crypto Podcast. I'm your host, Tony Edward, and with me is attorney Fred Rispoli, who's the founder of Hoddle Law.
Fred.
Great to see you.
It is great to be back Tony.
Fred. Of course, we got the big news yesterday of the SEC Ripple lawsuit ruling and the SEC getting one hundred and twenty five million dollars, and I want to get your take on it, you know, walk us through the ruling and the outcomes here.
All right, Well, it's you know, I've had a day to sleep on it and think about it, and there's a lot more nuance in there that you know I was picking up on. And I really have to give Judge Torres credit for the way she attacked this, because not only did she do it well on the legal side, but she also did it well to give each side enough of what they want and also fearful enough of what could be lost to really question whether there's gonna be an appeal here on this one. And I'll get
into that, you know, generally, as we go through. But you know, the bottom line is the order stands for the proposition that Ripple did not do anything with bad intent, or it'll repute, so to speak. So the penalty was on the lower side. It was a little bit higher than I thought it was going to be, but it was still low in comparison to the two billion dollars
being sought, and so you know, that's huge. The second thing, and actually this is probably the most sortant thing, is that the order that the sec had wanted the judge to sign, the one they drafted and gave the judge, was rejected by the court, and the court went with a very generic order that essentially says, you are enjoined from violating section five of the securities laws going forward.
And you know, guess what. You know, we haven't been you and me, we haven't been sued by the SEC yet, but we're also enjoined from violating section five of the Federal securities Law. So it is, you know, something that is as basic as it can be about you know,
what they're prohibited from in this injunction. And it does leave a lot up for question as to what Ripple can and can't do going forward, But it doesn't explicitly, you know, by or it doesn't explicitly destroy their business model, which is what the SEC was going for in this, and in fact it when it stayed far away from that, and that was, you know, the best takeaway out of this.
So FREDI, you know, let's say we go back to twenty twenty when this thing was filed. Obviously, they seemed to be some personal I don't know, vendettas or shots here because they went after Brad and Chris right and they made it seem like Ripple was doing this massive fraud scheme or something like that when it was far from that. So did the SEC kind of shoot itself in its foot by going adding all these things to this case versus saying, hey, your institutional sales are problems.
Let's talk. Yeah, the SEC, which it normally does, decided, let's go big, big guns going into this suit, and we're going to throw in in the individuals and we're going to throw our full weight behind this and try and scare them into a settlement on our terms. Rebels survived,
decided to fight. Most companies don't, and they survived the initial onslaught, and then after surviving that onslaught, you know, they just got better and better for them as the litigation went on, and you know, people forget the whole People don't forget the ethery and free pass, but some people maybe forget or don't know that when Bill Henman left the sec or and said even before he left and said I'm going to retire by this date, he continually went back and talked to people at the SEC
and really shepherded the decision to sue Ripple, really pushed it through, trying to make sure everybody says, even though we're all leaving, you guys got to still be on board with this and file this suit and then left and hoping it was all going to go to plan. And I mean it did take a very long time, but four years later it did not go the way they were hoping.
So XRP declared intrinsically not a security. Brad and Chris, you know that case has been dropped. The SEC gets one hundred and twenty five million dollars. Ripple seems to have walked away with the lion's share of the victory.
Here. Would you agree with that? I would, and I would disagree with the people who are out there saying their business model is significantly damaged or their ODL model is significantly damaged. I just don't see that based on what the ruling was, what the pleadings were going into it. You know, we can get into that, of course, but and also you know how the company has responded in you know, since the since the order came out.
So I guess the big question I have is can Ripple sell XRP to institutional investors, so let's say Black Rock or whatever right in the United States? I'm assuming no, But can they do it internationally? It seems like they can.
Well, I would argue that they can do it in the US and outside of the US a lot easier, but even inside the US, and the issue with inside and what is specifically prohibited is really depends on what
risk that Ripple wants to take. So you have to go back to the summary judgment ruling from a year ago when the judge said institutional sales are what is illegal, and the judge casually lumped in ODL in that category, and there was never really further discussion on that, and then we went into the specifics of what all those institutional sales were, so what they are definitely enjoined from going forward that there's no question is exactly what happened
as set forth in those pleadings and described, you know, with all the evidence, the contracts, everything, that is what's enjoined. And so Ripple can make an argument saying, are sales to other companies of XRP here, even in the US are so far outside of what we got punished for. It's just not an investment contract. And the only thing that happens there is that the sec gets wind of it and they tell Ripple to stop, and Rypple says, no,
these are not what we were prevented from doing. And there's a court order that says we are not specifically prevented from this. And I'm talking about the judgment, I guess, and the order itself. So the judgment is the two or three page document. The order is the fifteen page legal reasoning. You know. The judge there is where it gets a little you know, again, this is what this
is what I do appreciate Judge Torres doing. Is where she gave enough to both sides, so she I'm gonna just look at it so I don't talk too crazy. But you know, Ripple said, hey, get ODL out of this order. And the judge said in her ruling yesterday. Well, you know that I had ODL in the institutional sales bucket. You're telling me it's different. Just because you tell me it's different, I'm not buying it. But in the very next sentence she says, I'm also not not buying it.
So you know, she's saying, I'm not going to say that everything you're doing now is totally fine. In fact, you may you may have still been violating the law. I'm just going to tell you that you know you're in for a real whoopan' if if the SEC brings you back here and I find what you're doing is is outside is still within the scope of what I told you not to do. So yes, I would argue they can still sell XRP within the US, even without
registration and without an exemption. But you know, it depends on how much Ripple wants to play that to the line, and it depends on how much it's clients want to play that to the line. Although the clients don't really need to worry because none of them were taken a court and they made lots of money, even the ones way back that we're at issue in the institutional sales they made a lot of money on this, so you know,
they're very much in the clear. And it really comes down to what we're ultimately going to see is you know, there are a lot of people saying Ripple only sells XRP and that's its business model and it dumps onto retail. There's other people that say, when once the switch is flipped, you know, everything's going to go to the moon. And now is in a position where the emergency cover over
the switch has now been unlocked. And so we're going to see what was Ripple just for lack of a better word, blowing smoke or do they have a sustainable business model that they can now accelerate into serious growth. And you know, I believe that they do and they do have a strong business model. But we're going to see great point.
Now, there was a question from the community, and I have thoughts around this as well. So let's say institutions are accredited right there, they have all the licenses and all these things. Why can't Ripple specifically sell to black Rock and that be a securities transactions, but it doesn't affect the rest of the x RP in the open market or the XRP ledger can they just get a license for that aspect of the transaction, know if that makes sense.
Yeah. So here's where I know enough securities law to be dangerous because there it is incredibly complex when you get into all the rules and specific exemptions. And I'm just not an expert there, but based on my knowledge and understanding, if you're going to get an exemption, I don't you don't even need to register some of those exemptions. You just you know, have a good faith belief that you fall within there. And again it would be up to the sec to figure it out and take Ripple
back to court saying you're in contempt of disorder. You know by doing this. This is not an exemption. This is an institutional sale that requires registration. And so what Ripple can do? You know, if they go to exemption route, there's certain exemptions that they can't do because they've already gotten in trouble by the court. And when you get in trouble and have that type of injunction, it removes
some exemptions. And then it also could cause a problem because if you buy the XRP under an exemption, you can't resell it unless there's another exemption. And so that could make it a little more complicated, but it is one route that they could go through, is you know, the accredited investor exemption process.
Now, big question people want to or have, I should say, what's going to happen with the appeals? Will ripple and the SEC both appeal?
So I I think that, I mean, it is as close to a fifty to fifty as you can get, although I'm going to lean towards not appealing just because I think there's too many factors that if the SEC is wise and smart, which also is an issue that people might significantly disagree with me on and I probably disagree with me on that too, is that this isn't
really the best case to take up. When you're going to do an appeal, you want to have great facts because appellate courts, you know very much, will pick apart bad facts and use it to make bad law, or will not even give you the answer you want on a legal question if there are bad facts. And so that's what the SEC has here. You know, it's better to take an FTX or a do quon case like that up to up to an appeal, and that would just be a lot safer. So that's point number one
factor one against an appeal. I think the penalty, you know, looking back, was probably a great call by the judge because it's if the penalty was too high, Ripple would surely appeal. If the penalty was too low, the SEC surely would appeal. And you know, now on this the again going back to the facts issue, the SEC's got to go back up to the Second Circuit and say say that the discouragement of zero rout was a problem. Well, the Second Circuit already said that there can be zero disgorgement.
You've got a case where there was no investors that said they were harmed, and so the Second Circuit is just going to strengthen that opinion. And that is where the SEC loves filing cases is in New York, which is under the Second District. So that's a bad idea to appeal there. You know, on the appeal it side, Ripple can argue that there is no you know, essential ingredient to the contracts that they argued at the summary
judgment and loss. That's not a very clear cut winner case right there for them, And the SEC would want to appeal the secondary market issue, which is, you know, that's the one thing that is driving whether they should appeal or not is we got to get that off the books for the secondary market, because you know, that's critical to how we do this, how we run our enforcement actions, you know, anywhere with crypto and so you know, you could you could get a situation though, where they decide, well,
let's let's appeal the Binance one where they said no secondary markets with this exchange, and let the XRP one stand, and then XRP and Ribble would be in a unique one off where those facts have been decided and not appealed, and you could conceivably, three or four years get a ruling that secondary sales are securities generally, and only XRP is now, you know, completely protected from that because that aspect of it wouldn't be able to be changed, or
at least a very strong argument that any future decision doesn't affect that aspect of this ripple ruling. So there's a lot going on, and then there's also the political side of it. You know, I was starting to get worried when I missed my prediction by seven days that maybe the sec or that the court was saying, you know what if I wait until early September to issue a ruling. The SEC doesn't have to make a decision
on the appeal until after the election. You know, the Judge Tours has never kind of signaled doing anything like that or having those kinds of thoughts go through in her ruling. So it was, you know, but it did start to creep into my mind, but she didn't. And so now the SEC has to make that decision and ripple two by you know, early October. And so if they do, I mean to be to be honest, in US politics, a lot of people start making their minds
up the month before the election. That's when things get really crazy. That's why there's a term called the October surprise. And so if the SEC has to file a notice of appeal early October, every pro crypto force can say, this is another example, don't believe the reset. Don't believe you know anything that this campaign is telling you. They're anti crypto, and so that's just that's a political headache that they would have to deal with.
Yeah, I was gonna ask you about that because in the context of everything that's been going on over the past four to five months, I mean, you got Donald Trump, our presidential candidate calling out the head of the SEC, you know, and saying he would fire him, and so forth. You got Democrats turning on Elizabeth warning Gary gains Her, and then there seems to be some sort of capitulation
with the SEC. They dropped the case against the Binance stable coin, they dropped the case against Stax, they dropped the investigation against Etherorem, they approved the etherom metfs, and then there was rumors of the Binance us case. They're pulling out tokens like Solana Cardano and so forth. So something is happening here. Maybe that political pressure will influence if they.
Appeal or not. Yeah, there is foreshore political pressure, and they eventually some of these things will come out to the public. Some of these things will never know. There was extraordinary political The reason the ethery of METF got approved was because of political pressure. And you know, it'll be I guess probably not shocking to anybody in the XRP community when they hear how that went down, you know, when that eventually comes out. But there's other things going
on that are just phone calls, meetings. During you know, at a lunch at a popular lunch spot in New Downtown, you know New York. I'm sorry to all my New York fans out there for not using the right boroughs and whatnot. But wherever the courthouse is, and in New York, you know all the lunch spots around there, and you know in d C. And in the suburbs, and you know, down in all those hangouts where they're having these conversations.
And so you know, it's sad because that's not the rule of law, but that has always happened, you know, in America and otherwise you know where you have these conversations, and so that's happened. But you know, it's a battle right now between which faction is going to win out in terms of pro crypto or anti crypto. And it's been very encouraging the last couple of weeks and a couple of months, but you know, you really have to push forward. And you know, anybody that's very pro crypto,
I would just say, and I'm doing this. I'm voting on single issue pro crypto candidates. You know, in my elections. I'm out here in California and nationally because if I get super rich from crypto, everything I care about all these other things. I care about social, economic issues. I can do a lot more being super rich than I can be just being you know, you know where I am now.
Yeah, and I've brought up that point that first and foremost people are trying to survive. You have to have shelter, food, and you everybody's trying to increase their lifestyle right and make it better. And while there are other issues in this e lite, if you, like you said, are able to grow your wealth and become more financially free, you can then start to address some of those secondary tertiary
issues that you care about. But you can't do that if you're you know, not able to create that opportunity.
Yeah, exactly. I mean at the end of the day, you know what does happen and why, you know, short of getting drafted and sent off to war or you know, having federal forces or state forces show up at your doorstep and take you away to jail, there's not much you can do now that's to change things. Now, that doesn't mean give up and you know, not get involved at all, but just recognize what your limitation is and recognize kind of what you can do with whatever your
your circumstances are. And you know that changes if you have a family, don't have a family, or a business owner, not a business owner. But you know, the bottom line is the more resources that you have, the more change you can make. And you know that's just something. And if the way you're going to get resources is with crypto appreciating vastly, then you just got to solely focus on that side of the wing. On the political election side.
Final question herefore, I let you go, what are the odds or have the odds increase of an XRP ETF being approved by the SEC? Given that this thing is wrapping up, and look, I'm not talking this year, but maybe next year, what do you think about that?
I definitely think it goes up because I think there'll be a new regime next year. Even regardless of who wins, I think things will shift around. And I think that, you know, even if you know on the Republican side, we've got the candidate saying he's going to be extremely pro crypto, the great thing about not being in office is you can say whatever you want. And you know, we know that Trump's record was not very pro crypto twenty sixteen through twenty twenty. Granted it's been much worse
under the current regime. But those are the facts, and people can change, and I hope that Trump has changed on that topic. But I also think that all the money that is coming into crypto candidates. I mean, there was a very well known Democratic congresswoman, Corey Bush who just lost her primary. You know, there's a lot of
factors that went into that. But what people are sleeping on is that fair Shake spend a couple million or at least over a million trying to get her out because she was anti crypto, and so that's a message. When you are an incumbent and you lose a primary, that is noticed in the halls of Congress, and so you're going to get a favorable and more favorable than where it is now regime from the Democrats, you know, if they win the election. And so I do think
the chances of the XRP ETF have gone up. It'll be a little bit of a kick in the stomach to see us ALTA one go first. But I do think XRP is going to be in the top five for ETFs.
Yeah, I agreed, And you know, on that fair Shake superPAC it's over two hundred million dollars. Now, I think if I'm not mistaken. It's the largest super packing election cycle and it's crypto. If you told me that in twenty twenty three, I wouldn't believe you. But the industry is fighting back and I don't blame them.
Yeah it is. I mean, yeah, it's crazy. It's the largest or the second largest. I mean, it is a lot of money. And whether you're a Democrat or a publican candidate, you know one thing, and whether you agree or not, that moves these elections is money. And you go where the money is. And so you know, there could be a lot of people and if they all of a sudden are pro crypto because they're getting money, that's fine because they're expected to keep their promises when
they take that money. So whether they believe in it or not, as long as you get the right laws, the right legislation in there, I'm okay with that. Fred.
I appreciate you, man, I appreciate your insights. Thank you so much for joining me.
Oh, no problem. Let me just plug one thing I just found out recently on our Songbird air drop case against coinbase. We got an oral argument just set in early October, probably right after the day I think the appeals is going to be filed. So I wanted to say thank you to everybody who watched me try and do my best at the oral argument last week or two weeks ago against the SEC for the ethereum case we have. This one's more important for all the songbird
people who never got their Songbird from Coinbase. I'll put it on my x handle. If you watch that, I would really appreciate it.
Yeah, everyone go check that out. I'll put links to Fred's website and so forth in Twitter. But Fred, thank you so much for fighting on behalf of retail investors. And I don't know why Coinbase did this, but you know I appreciate you fight. Gonna be half of
Us, all right, Well, I'll see you later, Tony,