Ripple CTO And Deaton Dismiss Claims of $5B XRP Buyback

Attorney John Deaton has elaborated on the fate of thousands of investors who purchased XRP due to Ripple Board members' influence.

Replying to Jesse Hynes'remarks in a June 23 tweet, the CryptoLaw founder reaffirmed that most investors who purchased the token didn't know Ripple when they first invested.

He noted that 52% of the over 10,000 Ripple's native coin investors who communicated with him said they never knew anything about Ripple the first time they bought the token.

Deaton further clarified that Ripple selling XRP with an investment contract does not make XRP secure.

Deaton Outlines Scenarios of XRP Sales That Potentially Meet the Howey Test

Deaton's assertions sparked reactions among token's community members. One of the commentators, Caeser Korvinus, inquired about his fate considering that he and many other early investors knew about Ripple before investing in the token.

Korvinus stated that he invested in XRP in 2016 because of some notable figures among Ripple's Board of Directors.He also mentioned that one of the factors that gave him the confidence to invest in XRP was Ripple's CTO David Schwartz's expertise.

In response to Korvinus'tweet, Deaton said the SEC could argue that token sales met the Howey test if Ripple had direct contact with the investor. According to the lawyer, The SEC can draw three valid arguments from Korvinus' scenario.

Firstly, the regulator could argue that Ripple profited from a direct token sale to Korvinus and other early investors. The SEC could probably claim that Korvinus and others purchased XRP based on insider information.

Secondly, Korvinus and other early investors entered a Common Enterprise with Ripple via vertical commodity.Thirdly, the SEC could argue that Korvinus sat back and expected profit from Schwartz and other Ripple board of directors' efforts.

Nonetheless, Deaton said the entire scenario is different if the user did not purchase directly from Ripple.Moreover, the Howey test becomes invalid if Korvinus had bought token from Ripple for non-investment purposes.

Deaton Debunks Claims That Ripple's Native Token is a Security

Deaton explained that a scenario where Ripple sold an investment contract to Korvinus with Ripple's token as the underlying asset doesn't still make the token a security.

Deaton, representing over 75,000 XRP holders as amicus curiae in the Ripple VS. SEC lawsuit, has been remarkably vocal in debunking various claims classifying XRP as a security.

In response to the SEC's broad claims on XRP, Deaton argued that XRP sales in the secondary market do not qualify as securities.

The prominent lawyer believes that Judge Torres, the federal judge presiding over the Ripple VS. SEC lawsuit, would comment on XRP secondary market sales in her ruling.

Although there is no set date for the final ruling, Ripple expects to get a resolution on the case before 2023 ends.

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