SEC - Page 55

Ripple, the blockchain company currently facing a lawsuit from the United States Securities and Exchange Commission (SEC), may have to wait a little longer for a decisive ruling.

A district court judge in the U.S., Paul Barbadoro, declined to determine whether the secondary sale of LBRY Credits (LBC) qualifies as a security.

On July 11, Judge Barbadoro made his decision in a case brought by the SEC against LBRY, a decentralized content platform.

This ruling could establish legal precedent for Judge Analisa Torres, who will preside over the SEC’s case against Ripple in the coming months.

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In his ruling, Barbadoro abstained from taking a position on whether the registration requirement applies to secondary market offerings of LBC.

The secondary market involves trading securities between traders, while the primary market entails direct trading from the issuing company.

John Deaton, a U.S. lawyer representing numerous XRP tokenholders, sought clarification from Barbadoro regarding LBC’s classification as a security.

However, the judge upheld his “judicial restraint” and refrained from providing a definitive answer.

This recent opinion from Barbadoro represents a reversal from his stance during a January appeal hearing, where Deaton successfully argued that the secondary sale of LBC should not be considered a securities offering.

During the appeal hearing, the New Hampshire judge clarified that LBC only qualifies as a security when sold directly.

The SEC also acknowledged that secondary market sales of LBC do not fall under the definition of a security.

Although the SEC obtained a summary judgment in November 2022, it opted to settle for $22 million during the appeal hearing in January.

In May, the SEC revised the amount and requested a reduced fine of $111,000 due to LBRY’s financial struggles.

In the meantime, Jeremy Hogan, a U.S.-based attorney and advocate for Ripple, shared with Cointelegraph that Judge Analisa Torres is expected to deliver her ruling within the next few months.

Hogan anticipates that the broader outcome will be known before the year’s end, unless Ripple achieves a complete victory.

If the details of the ruling are unfavorable, appeals are likely to prolong the legal process.

However, Hogan reassured typical XRP holders that the final outcome would not significantly affect them.

Paradigm, a crypto investment firm, has criticized the United States Securities and Exchange Commission (SEC) for its pursuit of crypto exchange Bittrex, arguing that the regulator is unjustly trying to regulate secondary crypto markets.

Rodrigo Seira, special counsel for Paradigm, expressed his views on Twitter, following Paradigm’s amicus brief filing that called for the dismissal of the SEC’s case against Bittrex. Seira stated that the SEC’s claims rely on an unreasonable application of the Howey test.

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Paradigm filed the amicus brief on July 7, asserting that the financial regulator exceeded its jurisdiction.

Seira further highlighted that SEC Chair Gary Gensler had previously acknowledged the absence of a sufficient regulatory framework for crypto exchanges.

Seira argued that this acknowledgment indicates a lack of authority for the regulator to oversee these secondary markets.

Seira also emphasized these points in a blog post on July 7, where he pointed out that crypto assets do not involve investment contracts, and therefore, they fall outside the SEC’s purview.

He criticized the SEC for instructing the digital-assets industry to register without providing effective means for doing so.

Seira urged the SEC to engage in the rulemaking process requested by Coinbase, another crypto organization facing legal action from the SEC, in order to provide clarity and resolve the industry’s regulatory uncertainties.

The SEC initially filed a complaint against Bittrex on April 17. Subsequently, Bittrex surrendered its Florida money transmitter license on April 30 and eventually filed for bankruptcy on May 8.

This is not the first time Paradigm has supported a crypto organization facing SEC legal action.

On May 11, Paradigm sought to file an amicus brief in support of Coinbase, arguing that the SEC had failed to provide clear rules or guidance for digital asset firms operating in the United States.

Paradigm’s criticism of the SEC’s approach reflects a growing concern within the crypto industry about regulatory ambiguity and the need for a comprehensive regulatory framework that considers the unique characteristics of digital assets.

The outcome of the Bittrex case and the SEC’s response to industry demands for clarity will significantly impact the future of crypto exchanges and secondary markets in the United States.

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According to a recent report from crypto analytics platform Messari, The XRP Ledger (XRPL) has shown significant growth in various aspects of its protocol during the second quarter of 2023, despite concerns over the Ripple vs. SEC lawsuit.

The report reveals that the circulating market cap of XRP has increased by 42.5% year-to-date, although there was a 10.7% decline in Q2, from $27.8 billion to $24.8 billion.

The initial growth was driven by a surge in the asset’s price in the first quarter. While the transaction volume on the XRP platform decreased quarter-over-quarter, there was a noteworthy 12.7% increase in average daily nonfungible token (NFT) transactions, rising from 13,800 to 15,500.

Although Ethereum and Solana overshadow the XRPL in the decentralized finance (DeFi) and NFT ecosystems, there are indications that this trend is shifting.

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A key development in the XRP ecosystem highlighted by the Messari data is the expansion of XRPL sidechains.

Two notable protocols, Coreum and Root Network, were recently introduced, providing XRPL developers and users with desired programmability. Coreum focuses on ecosystem security, while Root Network drives metaverse innovations.

The XRPL also experienced a significant increase in the total new address count, reaching 138,790, a growth of 31.8% compared to the same period in 2022.

Additionally, quarterly revenue surged by 220.3% to $188,376.

Despite the ongoing SEC lawsuit, Ripple has seen efforts from developers within its ecosystem to drive utility adoption.

The progress made in essential operational aspects of the XRPL reflects its journey toward delivering sustainable value and utility.

Ripple’s distinct fundamentals, including its focus on real estate tokenization and dedicated research in blockchain technology, position it for substantial long-term growth and innovation.

While challenges persist, the growth witnessed in the XRPL’s protocol and ecosystem signifies progress in providing value and utility to its users.

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The United States Securities and Exchange Commission (SEC) has responded to Coinbase’s claims that it lacks jurisdiction to prosecute the crypto exchange.

In a letter addressed to a district judge on July 7, the SEC stated that Coinbase was well aware of the possibility that federal securities laws could apply to its operations.

The regulator highlighted that Coinbase had openly informed its shareholders about the potential classification of assets traded on its platform as securities.

The SEC’s response emphasized that Coinbase, being a “multi-billion-dollar entity advised by sophisticated legal counsel,” was deliberately disregarding decades of established law, particularly the Howey test.

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This behavior, according to the SEC, indicated Coinbase’s attempt to create its own standard for determining what constitutes an investment contract.

The SEC’s letter was in direct response to a previous filing made by Coinbase on June 28.

In that filing, Coinbase informed the court of its intention to submit a motion for judgment, which is typically used when a party believes there are no significant factual disputes in a case, as explained by Cornell University.

Coinbase had referred to statements made by SEC Chair Gary Gensler during his appearance before Congress, where he supposedly claimed that crypto exchanges were not under the purview of a market regulator and that only Congress had the authority to regulate them.

Coinbase also highlighted that the SEC had filed charges against the company two years after its public listing, despite having been provided with exhaustive descriptions of its activities.

Roland Chase, a corporate and securities lawyer, shed light on the SEC’s authority.

He explained that the SEC’s role, as authorized by Congress, is to review a company’s going public documents and provide comments to enhance disclosure to potential investors.

Chase emphasized that the SEC does not have the power to deny a company’s public listing simply because it disagrees with the investment prospects.

The SEC had previously charged Coinbase on June 6 for allegedly offering unregistered securities since 2019. A pre-motion conference for the case is scheduled for July 13 at 2:00 pm UTC.

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In recent times, a trend has emerged in certain corners of the cryptocurrency market, where investors are flocking towards microcaps that claim to be the next big thing after popular meme coins.

Tokens such as pepe 2.0, floki 2.0, and bobo 2.0 have gained significant attention within the past week by presenting themselves as new iterations of the well-known pepe, floki, and bobo tokens.

Consequently, trading volumes for these tokens have surged into the millions, attracting substantial liquidity and transforming modest investments into substantial fortunes almost overnight.

However, the lifespan of these microcaps is typically short-lived. Last year, we witnessed a similar phenomenon when hopeful investors placed their bets on articles inspired by the English language, as well as grimacecoin, which was sparked by a tweet from McDonald’s.

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The ability for anyone to create tokens on Ethereum or other blockchains through smart contracts for minimal costs, coupled with the presence of decentralized exchanges, allows for the rapid issuance, liquidity provision, and trading of these tokens shortly after their creation.

For instance, pepe 2.0, currently the most popular among the clones, recorded nearly $7 million in trading volume within a 24-hour period.

Its market capitalization reached a peak of $45 million last week but has since declined to $18 million.

Remarkably, a wallet that invested a mere $900 in pepe 2.0 witnessed its value soar to over $176,000 in less than 24 hours.

This profitable position was cashed out through the sale of 2 ether (ETH) clips as the token’s value continued to rise.

Bubblemaps, an on-chain analysis tool, has highlighted the centralized behavior of some early buyers who likely cornered a significant portion of the pepe 2.0 supply during its launch.

These individuals have been gradually selling their tokens, contributing to the substantial price surge due to heightened buying demand and limited sales from early buyers.

Meanwhile, the original pepecoin (PEPE) remains attractive to investors, as evidenced by substantial purchases that have propelled an impressive 80% rally over the past two weeks.

Notably, Lookonchain data reveals that two wallets acquired millions of frog-themed tokens on Monday, signaling a niche segment of the market speculating on these tokens surpassing dogecoin (DOGE) and shiba inu (SHIB), which are widely regarded as the most popular meme coins, in the foreseeable future.

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BarnBridge DAO, a decentralized autonomous organization, has instructed its members to halt all activities associated with the project following reports of an investigation by the United States Securities and Exchange Commission (SEC).

Douglas Park, a lawyer representing the organization, conveyed this information to the members through a post on the platform’s Discord channel on July 6.

To mitigate potential legal liabilities, Park recommended the suspension of all work related to BarnBridge, including the closure of liquidity pools.

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Additionally, individuals were advised not to receive compensation for their involvement in the DAO’s investment endeavors.

Co-founder Tyler Ward, known as “Lord Tyler” on Discord, subsequently confirmed the authenticity of Park’s message on BarnBridge’s Discord platform.

The reason behind the SEC’s probe into BarnBridge DAO was not explicitly stated by Park or Ward.

Park clarified that due to the investigation being ongoing and non-public, only limited details could be shared with the members.

Notably, prior to the SEC investigation, a proposal was put forth to retain the law firm Park & Dibadj, managed by Park himself, as the legal counsel for the DAO.

The proposal was voted on by BarnBridge tokenholders, with an overwhelming majority (94.3%) in favor.

However, some members have expressed skepticism regarding the SEC’s investigation, speculating that the founders may be leveraging it as an excuse for an exit strategy to potentially defraud investors.

Ward refuted these claims, emphasizing the implausibility of such an attempt.

Responses from BarnBridge DAO members on Discord varied, with some jokingly suggesting moving to Europe to evade the SEC’s jurisdiction, while others expressed concerns about the investigation’s impact on their involvement with BarnBridge.

BarnBridge is a decentralized finance protocol aimed at managing risks associated with inflation and interest rate volatility across multiple platforms.

Since news of the SEC investigation broke, the price of BarnBridge’s native token, BOND, has experienced a 1.9% decline, trading at $3.12 according to CoinGecko.

The token’s value has dropped significantly (98.3%) from its all-time high of $185.7 on October 27, 2020, resulting in a current market capitalization of $29 million.

Given the recent SEC lawsuits against major exchanges Binance and Coinbase for alleged unregistered securities offerings, the investigation into BarnBridge DAO, a relatively smaller organization, suggests that the securities regulator is widening its focus beyond just the crypto industry’s largest players.

Cointelegraph reached out to the SEC for comment but did not receive an immediate response.

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Binance.US has experienced a significant decline in market share of over 20% due to an ongoing lawsuit filed by federal financial regulators.

Reuters, citing data from Kaiko, reported on July 5 that Binance.US’ market share plummeted from over 22% in April to approximately 0.9% as of June 26.

The legal action was initiated by the U.S. Securities and Exchange Commission (SEC), which accused Binance.US, along with its parent company Binance and CEO Changpeng “CZ” Zhao, of operating as an unregistered securities exchange.

Prior to this lawsuit, the Commodity Futures Trading Commission had already filed a similar complaint against Binance and CZ in March.

READ MORE: How A Crypto Trader Turned $900 Into $176,000 With Pepe 2.0

In a parallel development, Coinbase, another prominent cryptocurrency exchange facing a lawsuit from the SEC, witnessed an increase in its market share in the U.S. According to Reuters, Coinbase’s market share rose from around 48% to 55% in June.

This surge in market share can be attributed, at least in part, to Coinbase being named as a surveillance partner in several SEC filings submitted by asset managers aiming to launch a spot Bitcoin exchange-traded fund in the United States.

On July 5, Cointelegraph reported that the combined trading volume of spot and derivatives on centralized cryptocurrency exchanges surged to over $2.7 trillion.

This increase in trading activity can be attributed, in part, to growing investor sentiment following BlackRock’s filing for a spot Bitcoin ETF.

However, it is important to note that the SEC has yet to approve any spot cryptocurrency ETFs in the United States, and it has rejected numerous applications from various firms.

Overall, Binance.US has witnessed a significant decline in market share due to the SEC lawsuit, while Coinbase has experienced a boost in its market share amidst its own legal challenges.

The cryptocurrency market as a whole has seen a surge in trading volume, driven in part by investor optimism surrounding the possibility of a spot Bitcoin ETF.

Nevertheless, the SEC’s stringent stance on approving such ETFs has resulted in the rejection of multiple applications from various companies.

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