Ethereum vs. XRP, who is the security!? The SEC, the securities enforcement agency, is gungho on
classifying a certain group of crypto assets as securities. Should it be Ether? Should it be XRP?
Or should it be neither!? Well find out in about 10 minutes….because it’s time for Chico Crypto!!
Yup the SEC has been playing hard ball lately. The SEC just launched a probe
against America’s largest crypto exchange, Coinbase, over alleged listing of securities.
And they named 9 crypto tokens of which they think are securities…as we can see
from this article they think AMP, Rally, DerivaDEX, XYO, Rari Governance Token,
LCX, Powerledger, DFX Finance, and Kromatika are securities that got listed on Coinbase.
So what about Ether and XRP!? Well this is an interesting story with many twists and
turn. But first we have to understand who is heading the SEC…that is Gary Gensler.
So what does ole Gensler think about crypto assets and securities? Well
just last month in Late June…Gary gave his opinion. Let’s listen in….
Gary would only mention Bitcoin as a non-security….No
mention of any other crypto asset, including Ether and XRP…
This is very interesting as many believe only 2 crypto assets have earned the fabled
non-security commodity status in the eyes of the SEC. That is Bitcoin and Ethereum.
In June of 2018, then Senior SEC Official,
William Hinman spoke on securities and crypto assets and this is what was said…
This set precedent, this spread through the media like wildfire. Top names like CNBC,
Yahoo, and Reuters declaring Ethereum as a non-security.
So what the freak is going on?? Why wouldn’t Gensler be on the same page with Hinman
who specifically stated that his department doesn’t think Ether as a security?
Well we have to go back in time to understand. Gary Gensler used to be a professor at MIT,
and he offered courses on crypto assets. And this is what he said in 2018.
And then once again in 2018 he broke it down even further…
And then Bill Hinman, the guy who stated this…left
the SEC in late 2020…which means maybe his and his department's opinion…doesn’t matter anymore…
Now…. What about XRP!? Well everyone knows, in late 2020,
December to be exact…XRP was hit and hit hard. The SEC announced that they had charged Ripple
and two executives with running a 1.3 billion dollar unregistered securities offering.
Which Ripple has been fighting for in court with the SEC for over 1 and half years now…
But there is one character…who is coming up frequently in the XRP-Ripple case.
Can you make a guess of who it is??
Bill Hinman. In July of 2016, the Judge overseeing the case allowed Ripple to
depose the SEC Official. From the article we can see “U.S. District Court Judge Sarah Netburn
has denied the SEC’s motion to suppress the deposition of the former director of the
SEC’s Division of Corporation Finance, William Hinman, in a ruling in New York on Thursday”
The SEC was looking to suppress Bill Hinman’s call to court,
but this was denied. Ripple is dragging Ethereum into the case. They are saying, Hey…if Ethereum
was allowed to do one in 2014 why are we getting hit with ours which started sales in 2013??
Then Eleanor Terret, Fox Business journalist who has been following the case tweeted this regarding
the latest SEC filings in the case. She tweeted this July 26th. “From the latest SEC filing:
“The Speech was not binding SEC policy--that is, a pronouncement of the Commission itself,
the Commissioners appointed by the President with the Senate’s advice and consent.”
With a video of the head of the commission Jay Clayton saying this…
Former commissioner Jay Clayton is telling people to look at Bill Hinman’s speech,
in which he covers what is a security and what is not. The same speech,
in which he declares Ethereum is not a security…
So on one hand, the SEC is saying Bill’s speech was not binding policy…yet the
former commissioner is saying that it was policy when he was leading the SEC.
So, there is a bit of a theory going around with the XRP army…called ETHGate. The XRP
army has concluded that the SEC was in bed with Ethereum, and the
EEA…allowing them a free pass from security laws. So what proof does this army have??
Well one thing they have been focusing on is Bill Hinman’s relations with a certain Law Firm.
As we can see Bill is listed as a Senior advisor to Simpson Thatcher..but we can also
see from his Linked’n he worked for this same firm as a partner from July of 2000
all the way up to May of 2017, when he came on to work with the SEC…
Now the head of the SEC ethics counsel, Shira Minton, sent an email to Bill regarding the
firm. And this is what Shira said “but bill, it occurs to us that you have a
full financial conflict with your old firm, not just an impartiality one.
Hence, you should not be having any meetings with your old firm. Even group meetings.
Well a Crypto Law on twitter, broke down what happened in 2018.
They begin their tweet thread by saying. “In 2018 alone, then SEC Director of Corporate Finance,
William Hinman reported receiving $3.4M from Simpson Thacher & Bartlett,
a member of the Enterprise Ethereum Alliance - an organization dedicated to promoting Ethereum.
Yeah, Simpson and Thacher were members of the EEA, they dropped out in May of this year…but
by using the wayback machine, we can confirm they were a member up until April of this year.
Going back to Crypto Law’s tweet thread, we can see they then say “The SEC is also fighting to
prevent the identification of Hinman's Simpson Thacher clients who met with him at the SEC
while the law firm was paying him a total of $15M over the 4 years he was in office.” With
a snippet of documentation from the case, which shows the SEC is doing just that…
But the big thing Ripple is going after is the Hinman emails. July 26th
this was filed in court by the SEC. From the filing “Plaintiff Securities and Exchange
Commission respectfully objects to Magistrate Judge Netburn,s January 13th, April 11th,
and July 12th Orders compelling the SEC to disclose 64 internal drafts of a speech by former
SEC division of Corporation Finance Director Bill Hinman and the emails circulating speech drafts.”
Now Ripple has until August 9th to file their response to the SEC ojections,
of which the SEC will be able to file a reply brief to this response, which is due no later
than August 16th. All objections and filing will be finished regarding the emails and speech,
and the Judge will decide on the outcome.
Sooo, what is going to happen? Is ETHGate real?? Well I’m not a fan of XRP, and I love Ethereum
for what it has done for crypto. But I don’t think either should be considered a security. I hope XRP
wins the case, allowing both XRP and Ether to be considered commodities. I just hope Ripple doesn’t
lose & bring Ethereum and many crypto assets down with them. Cheers! I'll see you next time!