In 2019, SEC’s Amy Starr and Coinbase’s Dorothy DeWitt made comments that are now considered critical evidence for Ripple’s Fair Notice defense and whether XRP is a security or not.
Over 12,000 XRP holders, represented by attorney John Deaton, have filed a motion to intervene in the SEC v. Ripple and filed a lawsuit of their own against the Securities and Exchange Commission.
The court ruling on whether the motion will be granted or not remains pending, but the lawyer has been gathering and sharing publicly what he called “significant evidence” for the two abovementioned lawsuits.
On Thursday, John Deaton shared on Twitter a video from Consensus 2019 on “Perspectives on SEC engagement concerning digital assets”.
Participants included Amy Starr, Chief of the Office of Capital Markets Trends in the Division of Corporate Finance of the SEC, and Dorothy DeWitt, General Counsel – Business Lines and Markets at Coinbase. DeWitt joined the CFTC later that year.
The video was originally shared by Twitter user @CRYPTOcounselo2 and is accompanied by the user’s key takeaways (transcript):
“a) Coinbase GC mentions approaching, working with, and the numerous conversations with the SEC
b) this talk (May 2019) occurred after Coinbase listed $XRP on their exchange (Feb 2019)
c) Coinbase GC mentions a desire to ensure they were not listing securities, also notes meetings with counsel, their QUALITY legal team that does their analysis – i.e. analyzing tokens to ensure that they are not securities BEFORE coinbase lists the tokens (cough $XRP)
d) This analysis is done because listing a security token would be violating securities laws (34 act).
e) Coinbase GC also mentions that the laws and the SEC’s approach – while developing – still creates a FAIRLY MURKY area. Does FAIRLY MURKY sound like FAIR NOTICE???
f) Coinbase GC describes Coinbase’s framework for listing digital assets – based on HOWEY and case law – they worked VERY HARD with outside counsel and think they have a GREAT framework. You know, the framework used to decide to list $XRP (XRP viewed as a non-security)
g) Coinbase GC also mentions that digital asset listings were run against the framework on a periodic basis. So up until the lawsuit was filed and Coinbase de-listed $XRP, their view was that $XRP was not a security from Feb 2019 to Jan 2021 – almost 2 full years!!!
h) Coinbase GC also notes that Coinbase has been transparent about their framework and the process with actual and potential regulators (e.g., @SECGov was well aware of the process and the listing back in early 2019).
i) Coinbase GC comments on @SECGov’s own framework and notes that it would be helpful if there were weightings for the various factors
j) Coinbase GC states that the @SECGov ‘s framework REINFORCED Hinman’s view that a token can be a security and then can evolve into a non-security. As this is said, Amy Starr @SECGov nods in agreement – agreeing with the views on $ETH in “When Howey met Gary (Plastic)”
k) Amy Starr then draws attention to HINMAN’S SPEECH and specifically says “again, as director Hinman’s speech had mentioned that everyone wants to REMEMBER from a LEGAL side”. Yes – the speech that apparently was not the views of the SEC, but yet again is being referenced
l) Amy Starr then describes a hypothetical of a company building the BEST platform where people NEED that token to PARTICIPATE in that platform… and that the @SECGov framework would recognize that. Sound familiar to any platforms we may know???”
John Deaton said if XRP Holders get a chance to be heard in this case, this is some of the evidence he will be presenting on their behalf “to show that regardless of whether XRP was a security in 2013-2017, it’s insane to say that today’s token itself is a security”.
He also provided some additional thoughts on the SEC official and the video: “Amy Starr is likely one of the fact witnesses from the SEC that Ripple elected to depose in addition to William Hinman. Her name was brought up in the Hinman deposition”.
“In the Consensus 2019 video Amy states “we have people that really understand the technology”. Amy Starr states that at the SEC “we developed an expertise” in blockchain technology and that at the SEC “we participate internationally”. ”
“Why is this all significant? One, XRP was internationally recognized as a non-security! Two, the SEC was an expert and understood blockchain technology so well yet it chose to not bring a case against Ripple or XRP for 7.5 years even though it aggressively pursued others between 2017-2019”, the XRP Holders attorney said, adding that “this makes the decision to file the case on Clayton’s last day even more arbitrary, capricious and suspicious.”
John Deaton also pointed to the statements by Dorothy Dewitt, Coinbase’s General Counsel of Business Lines & Markets, who made these comments three months after Coinbase listed XRP.
“Most significant is that we know Coinbase met with the SEC in early 2019 to specifically discuss Coinbase’s decision to list XRP. It is very likely that Coinbase met with Amy Starr who was a “senior person in the division with oversight of novel securities” and later joined the FinHub unit at the SEC”, he explained.
“Isn’t it ironic that a huge piece of evidence that Ripple will rely on to establish its Fair Notice Defense – that market participants reasonably believed that XRP is not a security- comes from a market participant that delisted XRP?” he pointed out. “Remember, the Fair Notice Defense is an objective analysis. What did market participants believe?”