A Twitter debate between lawyers and attorneys has reignited discussion surrounding Ripple's initial sales of XRP. Mark Fagel, a retired attorney specializing in SEC enforcement and securities litigation, and John Deaton, a pro-crypto activist and legal representative of XRP holders, engaged in the heated debate.
Fagel argued that while people can invest in anything they want, companies raising money from investors through securities must register those offerings and make required disclosures. He believed that the SEC had the better argument regarding Ripple's alleged violation of Section 5 of the Securities Act but added that he would not be surprised if the court rules otherwise. Deaton did not resist on the point of initial sales but expressed his concern about secondary sales.
His issue is with the SEC's contention that Ripple has engaged in the functional equivalent of a nine-year-long, ongoing initial coin offering, and that each and every sale of XRP is an offer and sale of a security, even on the secondary market.
Deaton sarcastically notes that the SEC's XRP theory is farfetched and travels through space and time into the future, capturing all possible future sales, even in faraway lands. He believes that Fagel and other smart and capable former SEC enforcement lawyers can credibly argue that, at some point, Ripple violated Section 5 of the Securities Act. However, he says they cannot credibly argue that the SEC's theory in the Ripple case is supported by the law or protects investors.
Fagel has not responded to Deaton's claims yet. It remains to be seen how the court will rule in the Ripple case and what implications it will have for the cryptocurrency market.