Ripple, however, has failed to bury the SEC in paperwork, with the judge granting the agency’s motion for a protection order against “unduly burdensome” requests
Magistrate Judge Sarah Netburn has ordered the U.S. Securities and Exchange Commission to answer some of Ripple’s hotly-contested interrogatories, which are meant to determine whether or not the plaintiff’s contentions can be supported by facts.
The agency will have to specify why the company’s XRP sales are investment contracts:
The SEC’s legal theory is not an excuse to avoid responding to Defendants’ factual inquiry. Nor is it a basis to answer a different question than posed.
In addition, the SEC will have to state whether it believes that Ripple’s efforts were key to boosting the price of XRP.
However, Ripple’s interrogatory about whether or not the XRP Ledger was fully functional prior to the start of the securities offering has been denied for being too vague:
The Court agrees that this interrogatory seeks relevant information. But Defendants’ interrogatory is too vague for the reasons identified by the SEC.
Netburn has also granted the SEC’s motion for a protective order, which allows the regulator not to respond to all of Ripple’s “unreasonably burdensome” interrogatories.
The agency claimed that covering all the 29,947 requests would take 104 days without “breaks or sleep.”
Earlier this week, the court also granted the SEC’s motion to extend the expert discovery deadline to Jan. 14, 2022, despite Ripple’s protestations.
XRP Lawsuit: The DPP Dispute is Back, Here’s How It May Ravage Ripple’s Former Win
The latest update in the XRP lawsuit saw both parties submit supplemental briefs on Deliberative Process Privilege (DPP) in the Defendant’s Motion to Compel Discovery, referring to the Second Circuit’s decision in the case of Natural Resources Defense Council v. EPA (NRDC). The NRDC case’s verdict has restructured the scope of DPP, further gravitating the XRP lawsuit in favour of the SEC, particularly over the documents submitted for in camera review.
SEC Seeks DPP Yet Again
SEC noted that according to the NRDC decision, the agency is not required to connect its records to a “single, discrete decision” to seek protection under DPP. Rather, the decision clarified that the SEC has the right to identify a broader “decisionmaking process” to which the records relate, instead of limiting it to an identified decision. Therefore, the plaintiff in the XRP lawsuit may now be allowed to seek protection for the three additional documents that were submitted by the SEC for in-camera review, given they fall under “consultative process”.
“Because all of the withheld documents are connected to an identified decision or decisionmaking process, the DPP protects them all from disclosure.”, wrote the SEC.
#XRPCommunity #SECGov v. #Ripple #XRP SEC files Supplemental Briefing regarding Deliberative Process Privilegehttps://t.co/yMxOhmcRgFhttps://t.co/CmwHA1xFH4— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) December 8, 2021
Additionally, the SEC asserted that according to the NRDC decision, DPP is also applied to “messaging records,” defined as “records relating to an agency’s decision about how to communicate its policies to people outside the agency”. The plaintiff’s internal communications about content of speeches and other public-facing communications are “messaging records”, and henceforth, protected by the DPP. Furthermore, they need not be related to “a finalized policy or to one not yet conclusively determined.”
“An agency “exercises ‘policy-oriented judgment’ when communicating its policies to people outside the agency” and therefore those “records reflecting deliberations—as opposed to merely descriptive discussions—regarding those decisions are protected by the [DPP].””, the SEC added.
Ripple Contends DPP Protection Appeal by the SEC
Ripple contended DPP protection for the SEC, arguing that according to the NRDC decision, government agencies, such as the SEC in the XRP lawsuit are responsible for connecting a withheld document to a “specific decision” or “specific decision making process”, which the SEC has failed to accomplish.
According to Ripple, the SEC never stated that it had commenced a policy process addressing whether to regulate digital assets as securities. Henceforth, the defendants claimed that the plaintiff has failed to identify any definable decision or decision making making in the first place, leaving it ineligible for protection under the updated scope of DPP.
“The SEC’s theory of this case has been that digital assets like XRP are plainly securities under 75-year-old judicial precedent, rendering policy-making unnecessary.”, wrote Ripple.
Ripple vs. SEC Drama Update: Parties Have Three Days Left to Supplement Their Arguments
Renowned corporate lawyer James Filan shares an order from the U.S. magistrate judge crucial for Ripple case.
Both Ripple Labs Inc. and the U.S. Securities and Exchanges Commission (SEC) should provide additional arguments to supplement their positions in three days.
New legal briefs should be filled before Dec. 8, 2021
According to the scanned copy of a document shared by Attorney Filan, U.S. Magistrate Judge Sarah Netburn has issued an order that asks Ripple Labs Inc. and the U.S. SEC to “simultaneously” file letter briefs.
#XRPCommunity #SECGov v. #Ripple #XRP Judge Netburn orders the parties to file supplemental briefing on Deliberative Process Privilege in light on recent Second Circuit case. https://t.co/KojVb9SOQZ pic.twitter.com/HCYJYAtwuW— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) December 3, 2021
The briefs should be filed before Dec. 8, 2021. New papers should supplement the parties’ arguments regarding Ripple’s latest motion to compel.
These supplemental briefings should be filed as Deliberative Process Privilege.
Mr. Filan’s audience is certain that the obligation to provide new briefs was hotly anticipated and should be interpreted as a small win for Ripple.
“The law change slightly favors the SEC”
At the same time, attorney Jeremy Hogan shares that this extraordinary document (“law change”) favors the position of the Securities and Exchange Commission.
However, commentators should wait for the release of new briefs, Mr. Hogan concludes. He compared the court order to the behavior of a “daddy” who changes his child’s bedtime.
As covered by U.Today recently, the SEC accuses Ripple Labs Inc. and its key officials, Brad Garlinghouse and Chris Larsen, of offering illegal securities to U.S. citizens in the form of XRP tokens.
This year-long legal battle highlighted many crucial questions regarding crypto regulation in the U.S., such as the status of crypto tokens and securities.
Inside the Ripple vs. SEC saga: Investigation reveals new details of personal interests at the SEC
- An investigation by FOX Business has revealed new tie-ups in the SEC vs. Ripple case, including Gensler’s huge role before he joined the SEC.
- Andreessen Horowitz has also been identified as one of the key players protecting Ethereum and nudging the SEC on which way to regulate the space.
Eleven months ago, almost to the day, the U.S Securities and Exchange Commission (SEC) sued Ripple Labs for violating securities regulations with its sale of the XRP token. It also sued Brad Garlinghouse and Chris Larsen, the CEO and Chairman of the firm respectively, for facilitating this violation and benefitting personally from it. Since then, it’s been a lengthy legal battle that doesn’t seem to be ending soon.
But were the charges motivated by personal interests? Are there higher powers that are protecting the other projects, especially Ethereum? Was Ripple identified as the cheap target of the enforcement despite working extensively with the SEC to prove it had abided by the law? FOX Business believes so, and in its latest investigation, it made out links between Gary Gensler, Bill Hinman, Jay Clayton, Joe Lubin, Andreessen Horowitz and other powerful players that span back to over three years ago.
A @FoxBusiness investigation into the biggest issue in crypto today: @SECGov vs @Ripple and whether the regulatory deck was stacked against the company and the tens of thousands of investors who hold the $XRP digital coin —https://t.co/dYPBVT7gY9— Charles Gasparino (@CGasparino) November 24, 2021
The biggest factor in the saga is Clayton, the former SEC head who in his last act filed the lawsuit against Ripple (literally hours before he left office). Clayton had been a Wall Street lawyer who, as a Republican, advocated for a free market. In fact, in his time at the SEC, most of the 65 new rules he passed were towards deregulation.
Prior to his action against Ripple, Clayton had brought 87 actions against cryptocurrency businesses. Most of these were charges of selling unregistered securities, with the two standouts being Telegram and Kik. The former had conducted a $1.7 billion token sale, one of the largest ever and had to return $1.2 billion to investors and shut down.
The investigation unearthed that in January 2018, Clayton had asked Andreessen Horowitz, one of the world’s most renowned venture capital firms, to organize a summit of cryptocurrency leaders. The purpose of the summit was for the leaders to weigh in on regulations and make recommendations to the SEC.
Sources with knowledge of the matter revealed that Ethereum was vastly represented, with several members of the Ethereum Enterprise Alliance in attendance.
One lawyer who attended the summit, Lowell Ness, later detailed that Clayton had told Andreessen to “round up the industry players to essentially lay out a very detailed written, foot-noted memo on what existing law says about utility tokens” and “give a proposal about where to go from here.”
Ripple executives, or their affiliates, were not invited to this summit.
This summit may sound like just another random event. But a year later, one of the lawyers present in this meeting was in a panel discussion in which he took partial credit for the now-very-famous Bill Hinman speech in 2018. This was the speech in which Hinman, who was a top SEC official, said Ether and BTC weren’t securities. He didn’t exempt any other cryptocurrency.
The lawyer, Nancy Wojtas of Cooley LLP, stated in part that “director Hinman’s speech … most of what he says in there came out of the safe harbor as well as the meetings we had with him.”
Was it a coincidence that Hinman exempted Ethereum after holding a summit with top Ethereum advocates?
Just as important to the Ripple saga is Gary Gensler, the current SEC head and former CFTC chairman. Sources have revealed that even before joining the SEC, Gensler was just as involved in laying out regulations meant for the cryptocurrency industry.
The first meeting was in March 2018. While all the details about the meeting have not been disclosed yet, sources say Gensler asked Clayton to take an even harsher stance on digital assets.
From the onset, Gensler had made up his mind that Bitcoin was not a security under the Howey test. Ethereum, on the other hand, wasn’t as clear-cut as BTC. Ripple’s XRP for him was an obvious security, even before the case against the company.
He told the New York Times in 2018:
There is a strong case for both of them — but particularly Ripple — that they are noncompliant securities.
Days after the first meeting, Clayton stated in a town hall meeting in Atlanta, “Most of what I’ve seen in the ICO space is a securities offering. It is raising money for a project where I give you my money, you give me some type of write-back that reflects a return on your project. That’s a securities offering.”
That first meeting isn’t the most controversial one, however. On December 21 last year, Gensler met Clayton once again. On his public schedule, Clayton detailed the sitdowns as “Meeting with Gary Gensler, president-elect Joe Biden’s transition team.”
The most striking thing about this meeting, in particular, was that it was one day before Clayton and the SEC charged Ripple with securities violations.
SEC giving Ethereum and Bitcoin a “hall pass”
Ripple has accused the SEC of bias and picking the winners and losers in the cryptocurrency industry. Garlinghouse, the CEO, has openly accused Clayton, and now Gensler, of playing favorites and giving Bitcoin and Ether a hall pass.
And it’s not hard to see why the California company feels it’s being targeted, especially vis-a-vis Ethereum. The Ethereum founders held an ICO as well and Vitalik has been quite involved in developing the platform up to date, including championing for Ethereum 2.0.
Joe Lubin, the other Ethereum co-founder has been open about the project’s lobbying with regulators. He has, over the years, touted the close ties that the Ethereum family has kept with the SEC.
For instance, he once talked about how “Bitcoin and Ethereum arrived before regulators were paying attention” and that “we were fortunate enough to frame our token as a utility token” while “others will be seen as securities.”