Ripple chief executive Brad Garlinghouse claims the truth is now out after the court unsealed a pair of legal documents the blockchain-based payments firm received in 2012 about XRP tokens.
“The Truth Is Out For Everyone To Read”: Ripple CEO
Court filings unsealed on Feb. 18 indicate that in a February 2012 memo sent to Jed McCaleb and Jesse Powell, Perkins Coie LLP international law firm advised Ripple not to sell ‘NewCoin’ via what seems like an ICO as it would result in classification as a security.
Ripple had to revise its business model and went back to the same law firm, leading to the second memo in October of the same year. This second memo, which was sent to Chris Larsen and Jed McCaleb, was more upbeat than the previous one and suggested Ripple credits (basically XRP) were not likely to be considered a security under federal laws. However, it warned that there was a slight risk that the U.S. Securities and Exchange Commission would not see things the same way.
After this analysis, the law firm further cautioned Ripple against promoting XRP as an “investment opportunity”, adding “if Ripple Credits are purchased and sold in the secondary market, individuals purchasing Ripple Credits may do so with the expectation of increased value caused by increased demand and limited supply”.
Now, Ripple CEO Garlinghouse believes “the truth is finally out”. Everyone can clearly see that the securities regulator waited eight long years to decide they disagreed with Perkins Coie subsequently “decimating thousands and thousands of XRP holders (who they purport to protect) in the process.”
Ripple’s General Counsel Stuart Alderoty says “the conclusion of the now public 2012 memos is clear: XRP “do not constitute securities.”
“The fact that Ripple had the foresight to seek legal advice from a prominent firm in 2012 – in the absence of clear case law and 5 years before the SEC even started talking about digital assets – should be applauded” – he concluded.
Memos “Overall Favorable” To Ripple And Defendants
For the uninitiated, the SEC sued Ripple in December 2020 for allegedly raising more than $1.3 billion via an unlicensed securities offering of the XRP tokens. In response, Ripple has been vigorously trying to prove that XRP is not a security asset.
James K. Filan — a defense attorney who has been following the SEC v. Ripple lawsuit very closely — believes Ripple was being careful, not reckless when it sought legal advice from a renowned legal firm in 2012:
“It seems to me that Ripple was being very proactive, which is very important. There certainly is nothing in these memos that suggests that Ripple was being reckless or ignored any substantial risks. In fact, the memos suggest the opposite — that Ripple was being careful.”
The big question on everyone’s mind is, what happens next now that the two crucial Ripple legal memos have been unsealed? According to Filan, the memos are “overall favorable” to Ripple and the two individual defendants, Brad Garlinghouse and chairman Chris Larsen, in the ongoing securities lawsuit with the SEC.
Meanwhile, former chairman of the Commodities Futures Trading Commission (CFTC), Christopher Giancarlo, says he stands by his extensive 2020 article where he affirmed that XRP did not qualify as a security under the application of the Howey test.