SEC “attacks from the flank”: ‘XRP is a security for its marketing’ at the core of Ripple lawsuit
SEC wants Ripple’s Slack messages badly, but the agency hasn’t produced any documents it has been compelled to deliver. Tension builds as deadline for the fact discovery period is 31 August.
The Securities and Exchange Commission has requested a pre-motion conference to compel Ripple to search and produce relevant communications between Ripple employees on Slack, which might help the agency building its case against the blockchain firm.
According to the letter sent by the plaintiff, Ripple “agreed to produce responsive Slack data but now, in the waning days of fact discovery, suddenly refuses to do so on the basis of Ripple’s mistakes in gathering that data.”
“Yet the relatively few Slack messages Ripple has produced have yielded critically important information—not contained in emails or other documents—that the SEC has repeatedly used in depositions to refresh Ripple’s employees’ dwindling recollections. The parties have met and conferred as to this issue and are at an impasse”, said Jorge Tenreiro, the lead counsel for the SEC.
“Ripple’s data error and refusal to produce most documents has already been highly prejudicial to the SEC. Among other things, the SEC has deposed 11 Ripple witnesses using incomplete records of their communications. For the reasons set forth below, Ripple should be compelled to search and produce responsive messages from 22 of its email custodians”.
It seems that months after the SEC’s refusal to hand over documents regarding the agency’s views on BTC, ETH, and XRP, despite the Judge’s insistence, Ripple has slowed its production of relevant information ahead of the fact discovery deadline, which is August 31.
John Deaton, attorney for the XRP Holders, commented on Twitter: “In the letter, the SEC admits it has deposed many Ripple employees and obtained Ripple documents. However, in the last hearing before Judge Netburn it was revealed the SEC had not turned over ANY internal documents it has been repeatedly ordered to produce.”
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SEC’s core contention: Ripple sold XRP as securities
“The request for “Slack” messages goes to issue #1 – whether XRP is a security – and now we see a major part of the SEC’s strategy! It is attacking from the flank and arguing Ripple marketed and treated XRP like a security and therefore it is. See footnotes on pg.4″, attorney Jeremy Hogan commented.
Mr. Hogan refers to the letter’s footnotes that say “this information is critically relevant to the SEC’s core contention in this case that XRP offers and sales are offers and sales of securities”.
“The SEC has had some success with this argument in the past and it makes sense as a strategy since in all substantive ways XRP is NOT like a security. We will need to see Ripple’s response before taking a gander as to whether the court will order production of the documents”, Mr. Hogan added.
“The last day for FACT discovery (this type of discovery) is the end of August. Then the sides disclose their expert witnesses and have another month or two of discovery related to experts. Not a game-changer but eye-opening because we get to see a major strategy for the SEC.
The SEC’s strategy for the win – claiming that Ripple sold unregistered securities regardless of the real nature of XRP – comes as no surprise. SEC Commissioner Hester Peirce made that clear in June, when she explained the agency’s enforcement criteria.
“When we think about a cryptoasset as being a security what we’re doing is we’re saying it’s being sold as part of an investment contract. It doesn’t mean that the asset itself necessarily has to be a security. It means that it was being sold as a security.”
