Did you trade XRP: Ripple puts SEC employees on the spot
New Motion to Compel aims to expose the SEC’s policies governing digital assets and their employees’ trading of XRP, ETH, and BTC. It may support Ripple’s fair notice defense.
Ripple has filed today a motion to compel the SEC to produce preclearance trading documents in regard to XRP, BTC, and ETH, as well as certifications concerning SEC employees’ XRP holdings.
This move aims to address the SEC’s refusal to produce certain information necessary to complete Defendants’ understanding
of the SEC’s trading policies governing digital assets and whether the SEC permitted its own employees to trade XRP, the letter explained.
“We met and conferred with the SEC on this issue on July 8, July 15, August 18 and August 25, without progress”, the counsel for Ripple and individual defendants continued, reminding that the court granted the motion to compel the SEC to produce its trading policies regarding digital assets in June.
The documents produced by the SEC then showed that, until January 19, 2018, the SEC had not adopted or imposed any policy restricting SEC employees from trading in digital assets – which is consistent with the SEC not having viewed digital assets as securities, the motion stated.
“This evidence provides strong corroboration of the Defendants’ defenses in this case and undermines the SEC’s claims. Specifically, the now-acknowledged fact that the SEC itself did not restrict its own employees from selling or buying XRP, notwithstanding its longstanding regulation against its employees engaging in securities transactions without preclearance, indicates that the SEC had not concluded, prior to at least January 2018, that sales and offers of XRP were securities transactions.”
Not only it will undermine the SEC’s allegation that Ripple and its individual defendants were reckless about learning the status of XRP as early as 2013, but it will support Ripple’s fair notice defense.
In addition, the SEC has a “prohibited holdings” list and a “watch list”. According to the agency, BTC, ETH, and XRP were never on the former. XRP entered the latter on April 13, 2018, meaning SEC employee transactions in XRP after that date were evaluate on a case-by-case basis.
“Defendants are entitled to know whether the SEC permitted its own employees to sell , buy and hold XRP as market participants during the very period the SEC now claims that Defendants violated the law and acted recklessly by selling XRP. Defendants are entitled to know whether the SEC ever prohibited its employees from trading XRP and if, as the SEC has orally suggested, that occurred for the first time only in March 2019.
“Defendants are also entitled to know whether the SEC’s approach to allowing employees to trade ether or bitcoin changed after William Hinman’s speech on June 14, 2018 – another issue that is highly relevant to this litigation”, Ripple argued.