SEC v. Ripple: SEC refuses to answer interrogation under oath and Ripple ‘suspects why’

Rick Steves

“The SEC refuses to answer […] because, Defendants suspect, a truthful, sworn answer would reveal that no contractual provisions actually bear the weight the SEC intends to place on them.

Defendants Ripple Labs and Chris Larsen have filed their reply to the SEC’s opposition to the motion to compel the SEC to provide clear responses to its interrogatory.

The inquiry regards the application of the Howey Test, particularly in what relates to the sales of XRP over the last eight years.

The defendants first summarized the SEC’s opposition to the motion: “The whole purpose behind the liberal discovery afforded by the Federal Rules of Civil Procedure is to avoid surprise and trial by ambush”, according to the regulator.

The SEC further stated that contention interrogatories are designed to assist parties in narrowing and clarifying the dispute issues in advance of summary judgment practice or trial.

However, the agency continued, Ripple and Chris Larsen’s interrogatories “are crafted precisely to address what Defendants believe are issues as to which there can be no genuine dispute, and which Defendants believe will facilitate the resolution of motions for summary judgment, or narrow the issues at trial.”

The SEC’s arguments fail to address the issue, according to Ripple and Chris Larsen, who stated the SEC has refused to provide basic information.

Given that the SEC has asserted that it may prove the existence of “investment contracts” based on the specific provisions of commercial contracts by which the defendants sold XRP, based on evidence outside the four corners of the contracts, or both, the defendants asked the SEC to identify such provisions.

The SEC’s refusal to answer is because “under Howie’s progeny, the contours of the investment contract may come not just from “contracts” but also from statements made in commerce and the very nature of character of the instruments”.

“That is a non sequitur”, Ripple remarked, pointing that such interrogatory is focused on the contractual language and asks the SEC to identify the terms – if any – in which it plans to rely”.

Ripple suspects why the SEC refuses to answer

“The SEC refuses to answer […] because, Defendants suspect, a truthful, sworn answer would reveal that no contractual provisions actually bear the weight the SEC intends to place on them.

“The same is true regarding the identification of the “common enterprise” in which XRP buyers allegedly invested, among several others.

“Each of these interrogatories addresses issues that Defendants believe are essential elements of their defense, and for each of them, the SEC has transparently refused to provide direct answers to avoid providing supporting evidence.

“The SEC can argue all it wants to the court that truthful answers to these interrogatories are not dispositive under their interpretation of Howie, but what it cannot do is refuse to answer the interrogatories in written”.

Ripple added that the SEC is still equivocating about its most basic allegations and Rule 33 prohibits this gamesmanship.

The legal fight over the interrogatories is seen as a “This is It” moment for XRP in the SEC v. Ripple lawsuit, according to expert analysis by the Hogan attorneys.

Thien-Vu Hogan explained why she predicts Ripple’s motion to compel better answers to interrogatories will be granted in large part and why it’s probably in the SEC’s best interests to amend its answers.

“They aren’t very compelling to me and obviously not very specific and if I was representing the SEC I would want to amend these with an eye towards summary judgment and I think it will be allowed to do so because discovery has not been completed yet”.

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