If you haven’t read the previous episode of this series, read it prior to reading this for a better understanding.
- SEC refuses to hand over important privileged documents even after the judge’s insistence by the argument that they are protected under DPP.
- The hearing on August 31 was a maxed out conference call but the judge made clear that any type of recording or broadcasting is prohibited and will be subject to criminal punishment.
- Ripple publishes regulatory framework and seeks for a settlement with SEC, believes its best for Ripple & XRP.
As per the legal documents filed in the U.S. District Court of Southern District of New York, in a lawsuit filed by SEC against Ripple, the lawsuit headed to the virtual court on Feb 22. Before the virtual court hearing, Legal Counsel for the ones who were named in the suit, CEO & Executive Chairman, Bradley Garlinghouse, and Co-founder, Christian Larsen, were asked to join an online pretrial conference with Judge Analisa Torres. The involved parties were ordered to file a joint statement that will include legal bases for the lawsuit with arguments and possibilities of a settlement, by February 15.
Statements
A statement released by Ripple on 29 Dec 2020 stated that “we’ve always said that there is a dangerous lack of regulatory clarity for crypto in the U.S. — their lawsuit has already affected countless innocent XRP retail holders with no connection to Ripple. It has also needlessly muddied the waters for exchanges, market makers, and traders. The SEC has introduced more uncertainty into the market, actively harming the community they’re supposed to protect. It’s no surprise that some market participants are reacting conservatively as a result.”
The statement also expressed that, “the majority of our customers aren’t in the U.S. and overall XRP volume is largely traded outside of the U.S. There are clear rules of the road for using XRP in the UK, Japan, Switzerland, and Singapore, for example. For eight years, we’ve built products that help hundreds of customers solve pain points around global payments — we will defend our company and look forward to settling this matter in court to finally get clarity for the U.S. crypto industry.”
SEC’s Use of DPP
The case took twists and turns, discovery extensions were given by the court. The SEC also refused to give critical documents even after the judge insisted. The SEC explained that they are preserved under the Deliberative Process Privilege (DPP). These documents mostly referred to the SEC’s point of view on ETH and were already considered relevant by the Judge for the court’s understanding in relation to Howey factors.
Hearings
- At the time, attorney Jeremey Hogan, in a video explained that “In other words, this upcoming hearing is very important because Ripple could potentially get some documents that could really help it advance its position that ‘XRP is like Ether and in 2018 the SEC said Ether is not a security and therefore XRP is not a security”.
- The hearing that took place on 31 August, started with the Judge, Sarah Netburn, reminding the audience that audio or video recording is prohibited.
- A few arguments were made by both the parties, but the main point on which the discussion stood was SEC using DPP to not hand over privileged documents and the judge wanting to see it with her own eyes.
- The conclusion of this hearing was the Judge reviewing SEC’s internal documents on her own which was set to happen before September 28.
Seeking Settlement
Later in November, Ripple published regulatory guidance for blockchains and cryptos but at the same time was tussling with the SEC about XRP being unregistered security. Ripple explained that timing matters the most and there can not be a better time to propose this regulatory guidance, as the SEC might come to a settlement, and that a settlement could be the best choice for Ripple & XRP.
What could be expected, what the community believes and how the community reacts will all be discussed in our next episode of this series.
Source: https://www.thecoinrepublic.com/2022/10/05/diving-into-the-details-of-sec-lawsuit-against-ripple/