In a recent development in the U.S. Securities and Exchange Commission (SEC) lawsuit involving Ripple Labs, the defendant Ripple resisted the SEC’s requests for post-complaint contracts for the sale or transfer of XRP to “non-employee counterparties,” audited financial statements, and information regarding the quantity of “XRP Institutional Sales proceeds” obtained subsequent to the legal action.
Ripple Rejects Requests from the SEC
In a late January 19 court filing, Ripple objected to the US SEC’s move to compel specific post-complaint discovery. In response to the SEC’s action in the XRP litigation, ripple attorneys have been pleading with Judge Analisa Torres to find in their favor because of the SEC’s illogical reasons.
The SEC asked the court to order Ripple to produce audited financial statements for 2022–2023, as well as the amount of “XRP Institutional Sales proceeds” that the company received after filing and contracts for the sale or transfer of XRP to “non-employee counterparties.”
But Ripple provided two justifications for rejecting the request. First of all, there is currently no justification for additional discovery into post-complaint sales because the SEC neglected to request discovery while fact discovery was still available.
The SEC maintained that post-complaint behavior was wholly unrelated to the case and never contended that post-complaint discovery was pertinent to remedies. Ripple says, “That motion was resolved after Ripple agreed.
Second, the court’s decision regarding remedies is unaffected by the SEC’s requests, which are deemed irrelevant. The SEC is debating whether Ripple’s response to its complaint
The SEC’s interrogatory in particular, the SEC has used all of its interrogatories in the case and cannot unilaterally grant itself more.” Ripple urges the court to deny irrelevant post-complaint discovery.
In the XRP lawsuit, attorneys argue that the discovery is irrelevant.
According to attorney Jeremy Hogan, there isn’t much legal relevance in the SEC’s current relatively modest discovery argument. Additionally, he examines the SEC’s 2020 grand press release, which was used to file the case and indicates that the SEC is beginning to lose control of it.
The SEC would need to litigate whether post-complaint sales satisfy the Howey standard, as attorney Bill Morgan pointed out. He says ODL clients will bring up a problem, as he mentioned in a few previous posts. “How does an ODL customer anticipate making money with XRP usage?”