Attorney Hogan Talks About the Surprise Bombshells Dropped at the SEC v. Ripple Discovery Hearing!.

Hello and welcome to Legal Briefs Crypto Geeky Edition and today I attended the SEC vs Ripple hearing made very easy by a cool new invention called the telephone and wow this was a very special hearing because there were two yes two bombshells and so on a scale of 1 to 10 this hearing was an 11 for Ripple. Yeah all the way up yeah all the way up you're on 10 on your guitar where can you go from there where I don't know where exactly what we do is if we need that extra push over the cliff you know what we do put it up to 11 exactly. So I got on the hearing and I was drafting a motion on my computer while I was listening because these motions and these hearings are pretty mundane and honestly I wasn't expecting this to be any different but around the 15 minute mark I stopped working on my brief because I realized the judge was letting this go further afield than normal. Actually I got so interested in the hearing that I never did finish the brief I was working on remind me to call my malpractice insurance on Monday because honestly I was blown away in a kind of legal nerd way by what I was hearing and I'm going to tell you exactly why but first real quick remember not to take what I say as legal advice I'm the lawyer who didn't finish his client's pleading today so if you need a good lawyer call this guy he can get anyone off or so I've heard put his name in the comments for free YouTube juice please. Okay so before we get to the hearing let me bring you up to speed we have four pending main motions in this case one is to compel discovery of documents by the SEC relating to Brad and Chris's financial information now that is the hearing that took place today we also have the SEC's motion to strike Ripple's fair notice defense we have the individual defendants Brad and Chris's motion to dismiss the lawsuit against them all together and then we have Ripple's motion to compel discovery from the SEC about why it took seven years to sue Ripple and some other juicy tidbits the motions to strike the affirmative defenses and the motion to dismiss the lawsuit will both be ruled on by Judge Torres and here's the scheduling order let's take a look so you can see first the Brad and Chris's motions to dismiss will be briefed by June 4 and the SEC's motions to strike Ripple's defenses will be briefed by May 27 now I'm not super happy with this schedule because I was hoping to see a much quicker time frame with this time frame we probably won't have rulings on these motions until mid-June at earliest also I would be remiss if I didn't mention today that attorney John Deaton refiled his letter to get his motion to intervene in the lawsuit heard by the court you may remember that the court initially denied this motion but as he promised and as I said a couple days ago he was going to refile his letter and he did that today remember I am never wrong and here is his letter here attorney Deaton in the second paragraph is asking the court to be allowed to intervene in the SEC versus Ripple case on behalf of over 10,000 XRP holders 10,000 now last time just a week ago that was only a number was only about 6,000 and I think I went over that in my last video why this intervention in the lawsuit is so important so keep an eye on this motion but let's go to the main event the SEC wanted to get records of the individual defendants Brad and Chris's financial information they wanted very detailed financial information about bank accounts checking accounts everything at this point Brad and Chris had already given the SEC the trading financial documents in other words they had given the SEC documents showing that on such and such a date Brad Garlinghouse sold for example 1 million XRP for $300,000 so the SEC has all those trading documents already so please understand that I've played this game for 20 years and let me tell you exactly why the SEC wants all this detailed financial information there's only two reasons to try to get this information one sometimes I will ask for this type of information because I want to catch the defendant in some kind of discrepancy so the trading financial records show for example that Brad made $300,000 on December 1st but his bank account only shows a deposit of $295,000 so it leads it to a cross-examination of hey you know Brad what happened to the $5,000 and sometimes you can make the witness kind of look bad like that and the second reason and this is what the motion is all about the SEC is trying to get these detailed records in order to make rich guys look bad now it's a common technique and what they want to do is they want to get a record that Brad Garlinghouse spent $10,000 on a new toilet bowl for his house $25,000 for a birthday party for his kid they want to get that in front of the jury and that's all this is they want to make them look filthy rich and hopefully leave a bad taste in the judge or jury's mouth don't blame the lawyers too much it's a dirty business we work in in any case the first thing I'll tell you is that Judge Netburn saw this motion for what it really was and she asked a very pointed question and I think she said something like quote do you have some evidence that the trading financial records are incomplete or somehow fraudulent and I don't think the SEC really had a good response to that question so after the hearing I thought that the judge is not going to give the SEC most of what it wants I changed my mind on that point after hearing the hearing the second thing I have to tell you is that Brad Garlinghouse's lawyer Matthew Solomon is an absolute beast he looks younger than I thought and fresh usually litigators look tired and haggard kind of like me and look where attorney Solomon worked until 2016 he was the SEC's chief litigation attorney for three years interesting anyway I was super impressed by him he was amazing and I'll leave it at that before things get kind of weird but none of that is the big news from the hearing not even close first off there was the bombshell from the judge just about 15 minutes in where the judge interrupted Mr. Solomon to say this quote my understanding about XRP is not only does it have a currency value but it has a utility and that utility distinguishes it from Bitcoin and Ether then attorney Solomon had to of course disagree with the judge and say no XRP is similar to Ethereum now the comment itself shows that the judge has done some research and is trying to understand but it's not quite there yet because as we know Ether has utility a lot of utility and has been given a pass already by the SEC so the comment in a way didn't make much sense but even if the logic is faulty the statement is premised on two humongous things one that XRP has a currency value and two that XRP has utility first no matter what the SEC might try and argue a currency and a security are by definition in opposite a currency can be used to procure things of value a security is an ownership interest in a common enterprise they are two different things the example you see in a lot of the case law is the laundromat example if you buy tokens for a laundromat that hasn't been built yet you've bought a security but once the laundromat is built you now have a currency because you can buy something of value with the tokens and that's the second thing that the judge disclosed is that she has bought into the argument that XRP has utility that at least at the present time that XRP can be used to do things and that is exactly what Ripple wants the court to be thinking when she first was hawking and said currency and utility I thought she was Chris Larson's attorney or something she sounded like she was arguing the case for them boom wow I mean that's the point at which I stopped working on my clients work and started listening and I'm glad I did because there was one more big point that was more subtle but let me I just want to flush one thing out first about the judge's statement now this hearing was with the magistrate judge her name is Judge Netburn and it is true that she isn't the main judge on the case but the first thing you have to understand is that in federal court Judge Netburn and Judge Torres they're kind of like a team and they work along with law clerks they talk about cases they roundtable them they go out to lunch they talk about them over lunch so when Judge Netburn says XRP is a currency with utility and she says it as a factual statement you better believe Judge Torres is very likely saying the same thing or at least knows that Netburn feels that way and the other thing to know is what the role of the magistrate judge is in the court let's take a look at a guide to the federal magistrate judge system for more information what does the magistrate judge do they settle discovery disputes they conduct mediations and they make recommendations regarding summary judgment yes Judge Netburn will be involved at the two most important junctures of this case she will be mediating the case and she will be involved in discussions with Judge Torres as to who should win the case now if I'm ripple I'm feeling pretty good that my mediator and consulting summary judgment judge just said on the record what I essentially argued in my pleadings and when I say I'm feeling pretty good I mean like is this really happening pretty good but there was one more thing that was huge in today's hearing that you had to listen very carefully or you could miss and it might be super important for everyone so listen to this about halfway through the hearing the judge skeptically made a remark to the sec attorney that based upon his theory everyone who sold xrp including you and me are selling illegal securities and she was skeptical about it when she asked a question and this is what the sec lawyer said on the record he said no under section 4 only ripple and affiliates of ripple can have sold xrp illegally listen to that again the sec said that only ripple and employees of ripple can illegally sell xrp now why is that super important that means that the exchanges that delisted xrp two months ago were not and would not be violating securities laws if they relisted xrp for sale and began to sell it again and I think I saw recently that one exchange recently relisted and so I wonder if there are perhaps a slew of non-action letter requests coming or already received by the sec and if so I wonder if we will see xrp for sale in the us of a once again I hope so anyway it's extremely late here as I shoot this and I have to sleep but thanks for watching and remember pay attention to the small and mundane things in life sometimes that's where you find the greatest insight