XRP Price Jumps 9% as Judge Overrules SEC

key takeaways

The price of XRP is up more than 9% in speculative trading after Judge Torres ruled the SEC to produce key documents relating to a 2018 speech
It follows a previous ruling by Magistrate Judge Sarah Netburn of the same nature earlier this year

XRP, the sixth largest cryptocurrency by market value, saw its price leap more than 8.8% on Thursday following a favorable district court ruling for Ripple Labs — the coin’s steward — in its case against the SEC.

Judge Analisa Torres ruled in favor of Ripple for the release of documents it had been seeking from the financial regulator. The documents center around a 2018 speech given by William Hinman, former Director of the SEC’s Division of Corporation Finance.

Hinman’s speech, delivered at the Yahoo Finance All Markets Summit in June of that year, pegs the former director as saying ether was not considered a security — a point of contention Ripple is hoping to pick apart in its defense against the regulator.

It follows Magistrate Judge Sarah Netburn’s ruling against the SEC and its attempts to withhold the documents Ripple had sought, in February and again in April.

Ripple’s defense is based on the argument that if ether was not considered a security at the time, then why should XRP — which is arguably more like a currency — be subject to securities rules? Or so the thinking goes.

In December 2020, the SEC filed suit against Ripple as well as former and present CEOs Brad Garlinghouse and Chris Larsen, alleging the company and its executives violated securities laws in 2013 when they sought to raise funds without first registering with the agency.

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Central to the case has been the discovery of documents, including emails, relating to Hinman’s remarks, which the SEC has attempted to argue fall under deliberative process privilege (DPP).

DPP protects certain pre-decisional, internal agency information from disclosure during litigation and is a fairly common provision within most established democracies, including in the US and Australia.

Both parties to the lawsuit agreed that the case should be decided by Judge Torres in a summary judgement expected in the coming months.

XRP was the largest gainer on the day, followed closely by the Bitfinex exchange token Unus Sed Leo (LEO) and Stellar (XLM) — Ripple co-founder Jed McCaleb’s subsequent project — at 6.5% and 6% respectively, as of press time.

All other cryptos in the top 50 by market capitalization posted mixed gains, with bitcoin up about 1% on the day.

The securities regulator announced a new spate of charges against little-known New York-based financial technology company, Hydrogen Technology Corporation, its former CEO, Michael Ross Kane, and Tyler Ostern, the CEO of Moonwalkers Trading Limited on Wednesday.

The SEC’s Enforcement Division alleges market manipulation and other violations of securities laws.

“Kane and Hydrogen hired Moonwalkers, a South Africa-based firm, in October 2018, to create the false appearance of robust market activity for Hydro through the use of its customized trading software or “bot” and then selling HYDRO into that artificially inflated market for profit on Hydrogen’s behalf,” according to a statement.

Ostern has already consented to a judgment, subject to court approval, with civil monetary penalties to be decided later, the SEC said.

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Unlike the case of XRP, the HYDRO token was not sold via an ICO-like fundraising campaign, but was airdropped to a selection of users, indicating the SEC’s interest in declaring cryptoassets securities is not limited by the method of token distribution.

That’s causing consternation among crypto legal eagles.

“You don’t even get to the Howey test until you determine there was an offer or sale. How is a free airdrop an offer or sale?” said J.W. Verret on Twitter.

Hydrogen co-founder Matthew R. Kane, whose brother Michael was named in the SEC suit, intends to litigate.

“This matter has been dragging on for many years and wholly lacks merit. We look forward to our opportunity to be vindicated after litigation,” he told Blockworks in an email.

The argument will hinge on whether the company benefitted from the creation of a secondary market for its tokens in a manner consistent with an investment contract.

“Moonwalkers was contracted as a vendor in 2018 and is unaffiliated with Hydrogen. The relationship ended years ago,” Kane added.

Macauley Peterson contributed reporting.

This story was updated on Sept. 30 at 10:05 am ET with comments from Hydrogen Technology.

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