While many in the community are expecting Ripple Labs and the SEC to come to a settlement soon thanks to the latter being led by “crypto-friendly” Gary Gensler, it would seem that the lawsuit itself is showing no signs of slowing down. The SEC’s latest letter attacking the defendants’ “fair notice” defense is a case in point.
This isn’t the first time the regulatory body has done so, however. Back in March, the SEC had claimed,
“Ripple seeks to avoid liability for its unregistered offering by diverting the Court’s attention with a number of affirmative defense arguments sounding in equity but all pigeonholed into the label ‘fair notice.’”
This defense, in particular, according to attorney Jeremy Hogan, could be “crucial” to Ripple’s chances in the aforementioned lawsuit.
In its latest letter dated 7 May, the SEC has now requested an informal conference where it will ask the court to compel the defendants to produce documents constituting and discussing any and all legal advice Ripple has sought in the past. Such legal advice will be pertaining to whether Ripple’s offers and sales of XRP would be subject to or in compliance with federal securities laws.
According to the SEC, it is well within its rights to make such a request since it claims the defendants “put the legal advice it received at issue” by using the same to assert its affirmative defense. By doing so, Ripple has waived privilege over the said advice, the letter added.
The SEC also accused Ripple Labs of “selective disclosure” to third parties, with the agency claiming that the blockchain firm has refused to produce all these documents, each of which is necessary for the SEC to test the factual basis for the defense.
“… the court should not permit Ripple and its employees to assert a defense that they had no notice that securities laws applied to their conduct, while Ripple is selectively denying the SEC access to documents and testimony sufficient to allow the SEC to test and rebut this defense.”
Going on to cite how the defendants have selectively disclosed differing opinions given by competing law firms, the SEC argued,
“The SEC needs access to these materials to probe Ripple’s assertion that it lacked a “fair notice” and what it “reasonably understood” as to the application of securities laws to offers and sales of XRP.”
In conclusion, the SEC also cited legal precedent to assert that Ripple should be compelled to disclose all the legal advice it received. Citing the case of Doe v. United States, counsel for the SEC Jorge Tenreiro argued,
“It’s a well-established doctrine that in certain circumstances, a party’s assertion of factual claims can, out of consideration of fairness to the party’s adversary, result in the involuntary forfeiture of privileges for matters pertinent to the claims asserted.”