SEC v. Ripple: Judge not happy with SEC’s arguments, Orders in-camera review

Rick Steves

“Let’s max out the conference call but give them zero to complain about”.

Judge Sarah Netburn has scheduled a telephone conference for today, 12:00 pm EST (New York time), to settle the privilege dispute that has been dragging on since April.

The SEC has argued its internal documents, which include the agency’s discussions over the nature of XRP and ETH, are protected by DPP (Deliberative Process Privilege).

That has been dismissed before by the Judge, two times already, as the Court considers those documents relevant to Ripple’s fair notice defense. The result of today’s hearing may well be a major win for Ripple.

The defendants have recently explained those documents will expose the agency’s contradictions in its decision-making throughout the years, which proves the SEC didn’t provide fair notice that XRP could be considered a security.

William Hinman’s deposition has already provided a general feel that regulatory clarity is something lacking in the SEC’s communications. Jeremy Hogan, an attorney friendly with the XRP community, has pointed out two bombshells in that deposition that could strengthen the fair notice defense.

The SEC yesterday filed a motion to compel Ripple to hand over recordings of specific meetings. “Ripple never informed the SEC that Ripple routinely recorded staff meetings until a key former Ripple employee testified to that in her deposition earlier this month”, said the plaintiff.

You might want to read this: 

SEC files motion to compel Ripple to hand over “hidden” recordings 

SEC v. Ripple: XRP Holders uncover video bombshell to throw against SEC

Did you trade XRP: Ripple puts SEC employees on the spot

Mark Cuban blasts SEC Chair on crypto clarity as Ripple lawsuit lingers

SEC appoints CFA’s Director of Investor Protection while under fire for Ripple lawsuit on XRP

XRP lawsuit: Ripple goes for the jugular with SEC’s contradictions

11:00 pm – XRP Holders vow to “max out conference call”

Judge Netburn has published the dial-in for tomorrow’s discovery hearing (8/31) at 12:00pm EST (16:00 UTC):

USA: (844) 867-6163

INTL: (409) 207-6969

Access Code: 9453921#

Unauthorized recordings will be investigated and anyone found to engage in such behaviors may be subject to criminal sanctions, Judge Sarah Netburn said in a letter.

John Deaton, lawyer for the nearly 20,000 XRP Holders that filed a motion to intervene in the SEC v. Ripple lawsuit, has called his following to max out the conference call. The hearing is limited to 4,000 listeners.

The SEC has already complained about the enormous popularity of these hearings: “Given the high level of interest in this litigation, participation by thousands of investors has already proven “incredibly disruptive” to Judge Netburn’s court conferences.”

“Let’s max out the conference call but give them zero to complain about”, John Deaton said.

SEC v. Ripple: Judge aware of XRP Army’s investigative work – Atty Hogan

12:30 pm – Session has started, Phone lines in full capacity

XRP Holders have kept their promise and maxed out the conference call as requested by attorney John Deaton, proving how critical the lawsuit is for the digital asset space.

The Judge has reminded the audience that video and audio recordings or broadcasts are strictly prohibited and subject to criminal sanctions.

Judge Sarah Netburn first asked about the SEC’s aiding and abetting claim regarding the complaint against the individual defendants, if Brad Garlinghouse think it relies on objective or subjective foreknowledge that XRP was a security in 2013, to which counsel Matt Solomon replied that it had to be obvious to reasonable people.

If the status of XRP was not obvious to the SEC until filing the lawsuit in December 2020, it could not have been obvious to Mr. Garlinghouse, Ripple’s counsel stated.

Matt Solomon then mentioned the SEC’s use of the deliberative privilege process (DPP) argument to keep its internal documents from being handed over to the defendants. Mr. Solomon argued that the plaintiff went grossly overboard in regard to DPP and should be compelled to hand over those documents as requested by Ripple.

Judge not happy with SEC’s subjective interpretation

Then, the Judge moved to attorney Jorge Tenreiro, the SEC’s counsel, and asked his view of the “reckless standard” for the aiding and abetting claim made by the plaintiff.

Mr. Tenreiro first attacked Ripple’s analysis and stated that specific, simple foreknowledge alone is all that counts. “But was Mr. Garlinghouse’s action objectively reasonable?”, the Judge asked.

The SEC answered with a subjective argument – “He could sit before a jury and say he did or didn’t know” – to which the Judge interrupted “But that’s subjective!”.

The Judge asked again and Mr. Tenreiro repeated himself, i.e., not offering an objective interpretation of Garlinghouse’s alleged aiding and abetting of an unregistered securities offering.

Then, the SEC counsel complained that Ripple wants to “collapse everything” into “digital asset law” and look at “everything internally” and “swing the door open” which would be “very damaging”.

Judge wants to see “privileged” documents with her own eyes

Judge Netburn asked why the court can’t look at that and if it needs to determine dates on what was deliberation or is it an ongoing thing.

Mr. Tenreiro explained there is “pre-decisional” and a “post-decisional” process and there are plenty of examples in the privilege logs to argue different, concurrent deliberative processes.

“How am I supposed to know all that?”, the Judge interrupted as she decided she would conduct an in camera review of the SEC documents.

Mr. Tenreiro advised the Judge to exercise caution, while stating it could be “very prejudicial”. Judge Netburn reminded the SEC the defendants “won’t be reviewing them” (the internal documents) during the in camera review.

The Judge will thus proceed with reviewing the SEC’s internal documents on her own to then rule on the deliberative process privilege claim by the SEC. The ruling should be made after September 28.

Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”

<