- Judge Netburn will likely have no choice but to force the SEC to release its documents on Bitcoin, Ethereum, as well as internal documents on XRP.
- The SEC issued a statement to an XRP holder as recently as October 2020 that a decision on whether to classify it as a security was open.
In the legal battle between the U.S. Securities and Exchange Commission, SEC and Ripple, both parties continue to provide an uninterrupted exchange of blows. In a letter sent yesterday to Magistrate Judge Sarah Netburn, Ripple’s lawyers write that the SEC’s refusal to release its documents on the classification of Bitcoin (BTC) and Ethereum (ETH) is based on a “mischaracterizing” of the facts and “a self-serving prediction of this case’s outcome”.
The Ripple lawyers give reasons why the documents on BTC and ETH, as well as the SEC’s internal documents on BTC, ETH and XRP, are relevant. According to the letter, Ripple attorneys are looking for evidence that the agency contributed to “widespread market confusion” regarding XRP:
Defendants instead seek documents that reflect, either directly or using internal communications as a proxy, how XRP was viewed in the marketplace. The SEC cannot deny that the agency is a focal point for requests for regulatory guidance as to whether XRP was a security.
Both attorney Jesse Hynes and attorney Jeremy Hogan celebrated the letter as a great one from Ripple. While Hynes wrote via Twitter, “This response is 🔥 🔥 in my personal, not legal, opinion”. Hogan stated that after this letter, the judge will have no choice but to grant Ripple’s motion and be supportive in disclosing the documents.
I would be shocked if the Judge does not make the SEC provide these documents.
Further, Hogan also analyzed that the lawsuit against Brad Garlinghouse and Chris Larsen brings knowledge of the wrongdoing into play and “that is turning into a big mistake for the SEC as it is what makes these documents relevant. How big a mistake will depend on what is in the documents.” Ripple’s lawyers may have already found a first “mistake” in the process. Hogan tweeted:
Another very interesting thing hidden in a footnote: The SEC told a retail XRP holder that emailed the SEC, that it had NOT made a determination as to whether XRP was a security in…wait for it….in OCTOBER 2020! They might have been drafting the lawsuit in October!
So the SEC could have been in disagreement about XRP’s status about 2 months before they filed the lawsuit against Ripple Labs, Garlinghouse and Larsen themselves. The argument of intent or recklessness in relation to the allegations against the two Ripple bosses would then probably be difficult for the SEC to sustain. The letter states:
Accordingly, if its internal documents disclose (as they undoubtedly will) that the SEC itself could not reach consensus about when a digital currency is a security and when it is not, it can hardly claim that market participants were in a superior position to know what the law requires.
Last but not least, Hogan also points out another important aspect that could put the judge on Ripple’s side.
Finally, the SEC is NOT helping itself when it tells the Judge half-truths. (See Section III) You can’t tell the Court you “produced” 97k documents when HALF of those documents were produced FROM Ripple to the SEC pre-litigation! That is a sure way to piss off the Judge!
A telephonic discovery conference has been scheduled for Tuesday, April 6, 2021 at 2:00 PM New York time to discuss Defendants’ joint motion to compel.