Ripple scores biggest win in XRP lawsuit, likely to force SEC into settlement

Rick Steves

This significant Ripple win may trigger an abrupt end to the XRP lawsuit as many close to the case believe the SEC will rather settle than hand over its internal documents. 

As expected, Judge Sarah Netburn denied the SEC’s Motion for Reconsideration of the DPP Ruling in the latest court order in the SEC v. Ripple lawsuit.

This motion was viewed as the “biggest decision in the XRP lawsuit” because of the consequences it would bring for the outcome of the case, the future of both Ripple and the SEC, as well as the future of XRP and probably the overall cryptocurrency ecosystem in the United States.

This significant Ripple win may trigger an abrupt end to the XRP lawsuit as many close to the case believe the SEC will rather settle than hand over its internal documents. The SEC has 14 days to file an objection to this decision to District Judge Torres.

The ruling might be an even bigger victory for Ripple as the order includes a “bullet proof section” that is expected to prevent an appeal, which could force the SEC into settlement even sooner.

SEC fails attempt to “have it both ways”

Judge Netburn explained that she ordered the production of certain SEC documents – after concluding they were not protected by DPP – in order to allow the defendants to challenge the SEC’s allegations that Larsen and Garlinghouse were objectively reckless in believing that XRP was not a security and that Ripple was on “fair notice” that XRP was a security.

The court added that reconsideration of a previous order is an “extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources.

In an attempt to claim privilege, the SEC said the court overlooked that Bill Hinman made his 2018 speech on BTC and ETH in order to communicate the approach of the SEC’s Division of Corporation Finance, and that the speech was the end-product of “significant collaboration” by many staffers across the SEC, as evidenced by the 68 drafts and associated commentary in the SEC’s privilege logs. Such deliberations should be protected by DPP, the plaintiff claimed.

“The SEC’s assertion that the Speech was intended to communicate Corporation Finance’s approach to regulating digital asset offerings is inconsistent with the SEC’s and Hinman’s previous position that the Speech was intended to and did reflect his personal views”, the order stated.

“The SEC seeks to have it both ways, but the Speech was either intended to reflect agency policy or it was not. Having insisted that it reflected Hinman’s personal views, the SEC cannot now reject its own position. The Speech was not an agency communication, and the deliberations as to its content are not protected by the privilege.”

“The SEC has failed to demonstrate that the Court overlooked any factual matters that were put before it in deciding the privilege’s applicability to Entry 9 of Appendix A. Its motion for reconsideration is denied. However, mindful of the “important public interests” served by the privilege, the Court agrees that clarification will aid the parties. ”

The court then clarified that its January 13, 2022 order compels production of all emails related to and drafts of the Speech on the SEC’s privilege log, except communications between staff discussing the speech in the context of how it implicates other, separate agency deliberations.

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