SEC Attempts To Block Judge’s Order in Ripple Lawsuit That Requires Revealing Email Conversations From 2018

The U.S. Securities and Exchange Commission (SEC) is continuing to fight an order in its lawsuit against Ripple that requires the SEC to divulge internal email conversations from 2018.

The SEC sued Ripple in December 2020, alleging that the company sold XRP as an unregistered security, a position the regulator maintains to this day.

The regulator also filed individual charges against Ripple CEO Brad Garlinghouse and the company’s co-founder, Chris Larsen.

Federal judge Sarah Netburn has ordered the SEC to hand over drafts and emails relating to a 2018 speech from William Hinman, the former director of the Commission’s Division of Corporate Finance. In the speech, Hinman said Ethereum (ETH) was not a security.

Recent court documents indicate that Judge Analisa Torres also denied the SEC’s motion to strike Ripple from using a “Fair Notice Defense.”

The San Francisco-based payments company has long argued that the SEC did not give Ripple adequate notice that the agency considered XRP to be a security.

However, Torres also denied Garlinghouse and Larsen’s motion to dismiss the SEC’s individual charges against them.

Now, in a new motion, the SEC is arguing that Torres’ dismissal of Garlinghouse and Larsen’s motion gives them extra leeway not to divulge the Hinman documents.

Says the regulatory agency in a new supplemental letter,

“Judge Torres held that the SEC does not need to prove that Individual Defendants knew or recklessly disregarded that Ripple’s offers and sales of XRP violated Section 5 of the Securities Act of 1933… Second, Judge Torres rejected the argument that the SEC must show that they knew or recklessly disregarded that Ripple’s actions were somehow otherwise ‘improper.’”

The SEC argues Judge Torres’s ruling makes it clear their internal documents are irrelevant.

“In light of Judge Torres’ Order, it is clear that the SEC’s internal documents – reflecting its staff’s thinking about XRP, Bitcoin, Ether, or any other digital asset – have no relevance to the Individual Defendants’ scienter. Nonpublic SEC documents cannot shed any light on whether Individual Defendants knew or consciously disregarded the facts that constitute Ripple’s alleged violation.”

John Deaton, an attorney representing XRP holders in the lawsuit, calls the SEC’s most recent motion “the biggest one in the case.”

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