Jeremy Hogan, a partner at the American law firm Hogan & Hogan, who has been closely following and commenting on the U.S. SEC’s lawsuit against Ripple, recently shared his perspective on the secondary market sales of XRP and their potential implications for the case.
In a Twitter thread published on May 29, 2023, Hogan emphasized that the secondary market sales of XRP could play a pivotal role in the lawsuit. The future of XRP, including its potential relisting on cryptocurrency exchanges, hinges on whether or not it is deemed a security. The SEC’s lawsuit implies that XRP is a security, similar to a company’s stock, but it hasn’t explicitly asked the court to declare it as such.
However, Hogan pointed out that the judge might not address this issue directly, as the SEC hasn’t explicitly raised it. This could leave a lingering uncertainty over whether exchanges would be willing to relist XRP.
Despite this ambiguity, Hogan suggested that there might be a way forward. Ripple could seek an agreement from the SEC or approval from the judge to include a clause in the final judgment stating that the judgment doesn’t apply to secondary sales. This strategy was successfully used by KIK Interactive in its legal battle with the SEC.
Another possibility is that the judge might address the concerns raised by several Amici about secondary sales. This issue has been advocated by XRP holders, led by attorney Deaton. Hogan also noted that the judge in the LBRY case has agreed to consider secondary sales to some extent.
If Ripple were to lose the case, the judge might be compelled to address secondary sales when determining penalties and drafting a disgorgement order. The judge would need to ensure that the distribution of the disgorged profits is fair, which would involve deciding who should receive the funds taken from Ripple. Ripple could argue that only those who directly purchased from them (and not secondary purchasers) should be reimbursed, as per the SEC v. Wang case.