- According to Hogan, the motion to intervene pens the door for a partial settlement for Ripple with regard to all XRP sales until December 2020.
- The intervention could thwart the SEC’s two-pronged strategy, which has not yet determined whether it is concerned only with past XRP sales or with XRP’s status as a security per se.
As CNF reported, the U.S. Securities and Exchange Commission (SEC) and Ripple have already submitted their comments on Friday regarding the intervention by attorney John E. Deaton on behalf of over 10,500 XRP holders. While the SEC letter indicates they do not want to provide clarity for the secondary XRP market, Ripple’s attorneys are proposing more limited participation rights, such as “enhanced amicus status,” if the intervention is rejected.
One of the XRP community’s favorite lawyers, Jeremy Hogan, has now published his legal analysis on both reply letters. According to Hogan, Ripple is using the XRP holders’ motion to attack the SEC. For XRP holders, meanwhile, the right to intervene would mean that they become a party to the litigation.
This would give them the opportunity to participate in the discovery phase and, as Hogan stated, “perhaps most importantly for them to submit a motion for summary judgement to the judge in which personal statements by individual XRP holders could be submitted to show the judge how the lawsuit by the SEC which is supposed to protecting them is instead hurting them.”
Does the motion to intervene open the door to a partial settlement for Ripple?
For the SEC, the intervention is “a big deal” because by claiming that Ripple has been selling XRP as unregistered securities to date, it would imply that XRP holders also hold unregistered securities in their accounts. While Ripple is trying to argue from a legal perspective that each individual XRP sale should be considered on its own, the SEC wants all XRP sales to be considered as one big 8-year sale.
Ripple is once again exposing the SEC with their response by revealing that the SEC’s claim is so vague and inconclusive because they want to leave themselves two ways open.
It’s so vague that the SEC can argue that all XRP are a security or, if it so decides, it can say, ‘oh no judge, we never suggested individuals are selling unregistered securities because we are supposed to protecting the people’.
And what Ripple is doing, they are piggybacking of the motion to intervene and calling out the SEC on this and saying, ‘You have to choose, are you alleging XRP is kindly inherently a security or is this lawsuit only about sales by Ripple and Garlinghouse.
In addition, Ripple is also supporting the #relistXRP movement by wanting to force clarity for the secondary market, as Hogan analyzed. With their response, Ripple is saying:
Hey SEC, if you don’t want this motion to intervene granted, then just confirm to the court that you are not trying to establish that XRP is per se a security, and we might agree that there is no reason for them to be involved.
At the same time, Ripple is exploiting the motion to intervene to indirectly propose a settlement regarding all XRP sales after the filing of the lawsuit:
Perfectly reasonable but also the perfect trap, or maybe it’s a settle outline of an offer of settlement. […] What Ripple is suggesting essentially is a settlement in which the SEC agrees to let go all current and future sales, and only continue to litigation as to the pre-lawsuit sales.
Conversely, this would mean that XRP holders, exchanges, and Ripple would have clarity for its escrow account and business model and would not be subject to SEC scrutiny. This would be exactly what Ripple wants. And according to Hogan, the SEC could potentially be in favor of the solution as well. As evidence, Hogan cites that the SEC’s response talks exclusively about sales “through December 2020,” when the lawsuit was filed.
Judge Grants SEC’s Request To Extend Discovery Phase of Lawsuit With Ripple by Two Months
A federal judge has granted the U.S. Securities and Exchange Commission’s (SEC) request to extend the discovery phase of its lawsuit against Ripple by an additional two months, according to new case documents.
Judge Sarah Netburn says in a new order that the additional time requested by the SEC will not impact “the schedule to resolve the case.”
“Rather, the additional time sought by the SEC will allow both sides to complete the outstanding fact discovery and properly prepare for expert depositions.”
The discovery phase is a pre-trial stage of a lawsuit where both parties present relevant information and evidence.
The SEC asked to extend the deadline for expert discovery from November 12th to January 14th, citing the need for “sufficient time to prepare rebuttal reports and depose a minimum of 14 expert witnesses.” The regulator argued such an extension wouldn’t extend the case’s timeline.
Ripple opposed the January 14th extension, arguing that expert discovery should only be extended to December 10th, saying the two-month extension “would needlessly prolong discovery.”
Attorney and crypto legal expert Jeremy Hogan, who is a Ripple supporter, disagrees with Judge Netburn about the extension’s impact on the lawsuit’s timeline.
Says Hogan on Twitter,
“Well, that is ‘no bueno.’
Judge argues that the additional time will not affect the schedule to resolve the case, but I don’t see how that is possible; it HAS to affect the schedule for briefing summary judgment.
Case summary judgment resolution now not until March-May 2022.”
XRP Lawsuit: Ripple appeals the Court to Disclose SEC’s in-camera review documents
The latest update in the XRP lawsuit saw Ripple respond to SEC’s letter with the explanation for its privilege assertions along with a redacted version of the three additional documents requested by the defendants for in-camera review. Ripple has requested the court to disclose these documents to the defense and has further continued to argue against the plaintiff’s repetitive “privileged” stance.
Ripple objects to SEC’s entitlement to keeping secrets under DPP
Ripple has contended SEC’s “pre-decisional” or “deliberative” argument for the three additional documents, noting that the commission has failed yet again to identify any specific policy process related to these or other documents, as it is required to when seeking protection under DPP. Ripple argued that the SEC claims against disclosure of discussions are weak and do not stand any legal relevance.
SEC asserts that “how to structure a forum the SEC intends to use to communicate with industry participants” is deliberative or would reveal its “mode of formulating or exercising policy-implicating judgment,”. However, the defense objects to the plaintiff’s assertions’ insufficiency to invoke DPP and states that if this argument is considered valid in the court, then that would extend the invalid privilege to virtually every document or communication in a federal agency.
“The fundamental problem with the SEC’s approach is that the agency apparently believes that it is entitled to operate in secret, and to withhold from actual litigants, whose reputations and livelihoods are at stake due to its own affirmative litigation choices (as opposed to the general public pursuant to FOIA), any internal documents that relate to its mission, broadly defined. This approach finds no basis in law because it turns on its head Congress’ lawfully enacted presumption of openness in government documents, subject to circumscribed, narrow exceptions.”
While the Court granted Ripple’s September 24 appeal, seeking the addition of three documents by the SEC for in-camera review, it still has not permitted disclosure of mentioned data to the defendants. These documents include the two documents related to the SEC’s meetings with law firms, along the email trail concerning discussions with a third party who received guidance from the SEC to analyze its digital asset under the framework set forth in Hinman’s June 14, 2018, speech.
SEC v. Ripple – Court orders plaintiff to ‘answer Ripple’s interrogatories’
Within 24 hours of the court approving the Securities and Exchange Commission’s request to postpone the discovery deadline to January 2022, Judge Sarah Netburn has responded to two pending motions in the SEC v. Ripple Labs lawsuit.
One of the motions was from defendants Ripple Labs and Chris Larsen to compel the SEC to supplement its responses to eleven of its interrogatories and two of Larsen’s. Meanwhile, the other motion from the SEC sought a protective order to relieve it of the obligation to respond to 29,947 separate requests for admission, as per the filing.
Judge Netburn has now granted and denied both motions in part.
The judge ordered the SEC to answer Ripple’s interrogatories and identify the specific terms of the “investment contract” from XRP sales. The order added,
“Ripple’s interrogatory is relevant (and precise) and will clarify whether the SEC contends that the terms of any contract identified in response to Ripple’s Interrogatory No. 1 created an expectation of profits by the purchaser of XRP.”
“Accordingly, Defendants’ motion regarding Ripple Interrogatory No. 2 is GRANTED, and the SEC must supplement its response to Interrogatory No. 2 to identify any specific contractual terms and not just implicit and explicit promises as previously identified.”
The SEC must also respond to whether it contends that “efforts by Ripple were necessary to effect any increase in the price of XRP.” The court granted most of the defendants’ motions to compel answers on interrogatories, except one.
This was the motion from Chris Larsen on when XRPL is fully functional. Judge Netburn denied it without prejudice for being “too vague,” with the parties ordered to confer clarity terms.
Meanwhile, the SEC’s motion for protective orders was also partially granted and denied. The judge granted protection on Defendants’ 28,849 RFAs, noting that “it is hard to view this stunt as anything more than theater.” The order added,
“The motion for a protective order is GRANTED on burden grounds. Having granted the motion to compel a response to Ripple’s Interrogatory No. 2, the protective order is also GRANTED as cumulative and duplicative of another form of admissible evidence.”
As the SEC and Ripple filed their responses, the timeline for the case may extend due to the postponement of the discovery deadline. This deadline was pushed so that the parties could complete the expert depositions and beef up their preparations.