In a thread of tweets, pro-Ripple lawyer Jeremy Hogan gives a cogent reason why he believes Ripple did not sell XRP as a security: the overwhelming majority of the evidence indicates that XRP purchasers did not rely on the efforts of Ripple.
Hogan shares a screenshot of one of Judge Torres' decisions, which provides a clue as to how she might "rightly" find that XRP was not sold as a security.
The #2 reason Ripple did not sell XRP as a "security." (small thread)— Jeremy Hogan (@attorneyjeremy1) April 14, 2023
The recent opinion from Judge Torres provides a clue as to how she might (rightly) find that XRP was not sold as a security.
First, look at the version of the Howey test she cites: pic.twitter.com/QzVwRekxve
She addresses the issue in the case as to whether the defendants offered to sell or sold XRP as a security. The document added that, specifically, the SEC alleged that the defendants sold XRP as an "investment contract," which is a security defined under the Securities Act.
On the other hand, Ripple defendants argue that they did not sell XRP as an investment contract, and therefore no registration was required.
The three prongs of the Howey test were listed in a sentence that explains the "test" of the investment contract: "The Supreme Court held that the test for an investment contract under the Securities Act is whether the scheme involves 1. an investment of money. 2. in a common enterprise, 3. with profits to come solely from the efforts of others."
To argue prong 3 of the Howey test, the SEC retained its expert witnesses. However, the SEC's expert "witness 1" testimony was overturned, as he did not justify the six factors he listed that would have been important to a reasonable purchaser of XRP. The judge added that he did not cite sources supporting his method of measuring the perceptions of XRP purchasers or their behavior.
Finally, at his deposition, the SEC expert conceded he did not speak to any purchasers of XRP in preparing his report.
Ripple should prevail in lawsuit: Hogan
There is only one SEC expert witness left to testify on prong 3 of the Howey test, who maintains that Ripple manipulated the price of XRP. The SEC parades a "cacophony" of various statements made by Ripple as its evidence for prong 3, which includes marketing materials, tweets and statements that an increase in XRP's price was "Ripplemania."
According to Hogan, there is no evidence yet that XRP buyers saw this "cacophony" of statements influence their decision. The question asked by the test is what XRP purchasers thought or knew when they were buying XRP.
Ripple has witnesses that testify XRP was publicly deemed a currency and an asset (not a security), with thousands of XRP holders represented in an amicus brief. Finally, the SEC's expert admitted that most XRP price movement since 2018 has no relation to anything Ripple does.
Hogan concludes that Ripple should prevail in the lawsuit given the paucity of evidence presented by the SEC and the overwhelming majority of the evidence that XRP purchasers did not rely on the efforts of Ripple.