Ripple CTO Emeritus Accuses Former SEC Official of “Rewriting History” Over XRP Lawsuit

Ripple CTO Emeritus David Schwartz has challenged claims that the SEC limited its lawsuit against Ripple to the company’s method of selling XRP rather than the token itself.

Schwartz made the remarks while responding to former SEC Commissioner Marc Fagel, who argued that the SEC consistently maintained that XRP is merely computer code and not inherently a security. 

XRP Community Marks Landmark Court Victory

The exchange came as the XRP community celebrated the anniversary of the landmark July 13, 2023, ruling, in which a federal court held that XRP, by itself, is not a security. Ripple Chief Legal Officer Stuart Alderoty also marked the occasion, describing it as “Happy XRP Is Not a Security Day.”

Amid the celebrations, Fagel reiterated that the SEC’s case focused on Ripple’s conduct rather than the XRP token itself. According to him, the regulator argued that Ripple sold XRP as an investment contract but never claimed that XRP, standing alone, was a security.

Schwartz Rejects Fagel’s Interpretation

However, Ripple CTO Emeritus David Schwartz strongly disagreed, arguing that Fagel’s claim is “a bizarre attempt to rewrite history” by changing the SEC’s original litigation strategy. 

According to Schwartz, it is inaccurate to suggest that the SEC viewed XRP as a computer code that became a security only due to Ripple’s sales practices.

Instead, he maintained that the SEC advanced a much broader legal theory throughout the case. In his view, the agency consistently argued that XRP buyers reasonably expected profits from Ripple’s efforts, thereby satisfying the key elements of the Howey test.

Schwartz emphasized that this argument was not confined to Ripple’s institutional sales. Rather, he said the SEC also applied the same theory to XRP transactions conducted on public cryptocurrency exchanges.

Summary Judgment Filing Supports Broader SEC Theory

To support his position, Schwartz pointed to the SEC’s motion for summary judgment and urged Fagel to revisit the filing. He argued that the document clearly shows the regulator pursued a broader legal theory than many critics now acknowledge.

According to Schwartz, the SEC merely acknowledged that a digital asset such as XRP is not automatically a security in every possible context. However, he stressed that this differs significantly from claiming XRP became a security because of Ripple’s particular sales practices.

As a result, Schwartz argued that Fagel conflates two distinct legal concepts and, in doing so, alters the meaning of the SEC’s original argument.

XRP Court Ruling Marks Third Anniversary 

Meanwhile, the debate comes three years after Judge Analisa Torres issued her landmark decision in the Ripple case. She ruled that XRP itself is not a security and concluded that Ripple’s programmatic sales on cryptocurrency exchanges, as well as certain other XRP distributions, did not violate federal securities laws.

However, the court found that Ripple’s institutional XRP sales constituted unregistered securities offerings and therefore violated securities laws. The case proceeded to the Second Circuit, with both parties appealing the portions of the ruling they disagreed with.

However, following a change in the SEC’s administration, both sides withdrew their appeals last year, bringing an end to the multi-year legal battle that had weighed on XRP’s performance.