The U.S. Securities and Exchange Commission filed a lawsuit against Ripple Labs, Inc. for allegedly violating securities laws when it sold the company’s token, XRP, in violation of rules that require securities to be registered with the SEC before they are sold to the public.
Ripple Labs is fighting back, insisting that its 5,000 pages of responses to legal statements are reasonable and will reduce the trial period.
SEC’s Legal Requests For Admission
Ripple Labs has stepped up its already bitter lawsuit over XRP by asking for nearly 30,000 responses to legal statements covering more than 5,000 pages – and the SEC is upset.
In a letter this week to U.S. Magistrate Judge Sarah Netburn, a SEC attorney Mark Sylvester described Ripple’s 29,947 “requests for admission” (RFAs) as “unduly burdensome.” An RFA sets forth statements sent by one party in a civil litigation to its opponent that they should either admit or deny.
It is not permissible for a party just because a case is complex, significant, or widely publicized to issue a crushing number of Requests for Assistance that are ‘abusive, unreasonable, and oppressive,’ Sylvester explained.
According to him, many of the RFAs contained “disputed, irrelevant or otherwise objectionable claims, and as a result are unlikely to result in useful admissions” as well as being “cumulative and redundant.”
According to the SEC, simply responding to 776 RFAs would take more than 300 hours to complete, 219 RFAs would take more than 120 hours, and 28.862 RFAs in a third set would require dozens of hours to complete.
However, Ripple has claimed that all three sets of RFAs contain relevant issues, the burden they impose is not unreasonable and that narrowing the issues for trial may save significant trial time in the future.
A complaint was first filed with the court in September relating to Ripple’s “fair notice” defense, including the SEC’s obligation under Morrison v. National Australia Bank Ltd to prove that the allegedly illegal XRP sales had occurred.
Ripple Labs Inc Is Fighting Back For XRP
Ripple’s defense attorneys wrote to Netburn in an Oct. 7 letter asking the judge to reject the SEC’s request not to have to respond to Ripple’s demands that the quantity of RFAs be proportional to the needs of the case.
As reported by the SEC, the largest set of RFAs [of 28,862] is based on its belief that every offer, sale, and distribution of XRP by the defendants from 2013 through December 2020 shall be reported as a reportable transaction.
At issue in this case are the express terms of more than 1,700 separate contracts.”
According to Ripple’s attorney, the SEC complaint that the contracts were unduly burdensome is unfounded: This is an astonishing admission. Apparently, the SEC did not review these contracts before alleging that they were all part of an unlawful course of conduct in its complaint.
In fact, the SEC is seeking disgorgement of ‘at least’ $1.38 billion in revenue generated by Ripple from these same contracts, but isn’t bothering to read them.
It is alleged that Ripple’s XRP token sale was worth over US$1.38 billion, according to a lawsuit filed by the SEC in December 2020.
According to the SEC, the CEO and chairman of Ripple, Brad Garlinghouse and Chris Larsen, have been named co-defendants for allegedly aiding Ripple’s violations.
In its lawsuit, the SEC wants to determine whether XRP transactions constitute “investment contracts” and therefore securities subject to registration under Section 5 of the Securities Act of 1933.
It has declined to point to a single contract provision that supports its claim that these are investment contracts under the Howey test, despite numerous requests to do so.,” Ripple’s defense attorneys wrote.
SEC Requests Ripple’s Internal Meetings Transcripts
Additionally, Ripple is being compelled to provide recordings of internal employee meetings to the SEC as part of its investigation.
In response, Ripple called the SEC’s request “disproportionate” and claimed that it searched for recordings comprehensively and reasonably. However, the SEC challenged Ripple’s search, claiming it was inadequate.
Additionally, Ripple is seeking a court order to deny its request for transcripts of video and audio recordings of internal meetings conducted by the company, which the SEC filed in support of its letter motion.
It is unlikely that any business or privacy interests outweigh the potential impact of the documents on the Court’s decision on the discovery dispute,” wrote SEC attorney Pascale Guerrier in an Oct. 14 letter to the judge.
Ripple’s discovery efforts have been criticized by the SEC before. In August, the SEC sought to be forced to produce relevant Slack conversations between Ripple employees.
Ripple’s objections about cost and complaints about the SEC’s “costly fishing expedition” were overruled by Netburn, who permitted SEC access to Ripple’s Slack messages.
Netburn wrote that the messages sought are relevant to the parties’ claims and defenses, and proportionate to the needs of the case. “Any burden this imposes on Ripple is outweighed by the previous agreement it had to produce relevant Slack messages.
The SEC directs Ripple to search and produce the 22 custodians’ documents from the Slack platform.
According to CoinGecko, XRP reached US$1.22 this week, the highest since the beginning of September amid the ongoing litigation.
As part of its longstanding legal battle with the SEC, Ripple played strong hands last week, according to Bitpanda’s Lukas Enzersdorfer-Konrad, chief product officer. Ripple’s court battle against the SEC in the tenth month likely contributed to the rise.
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Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
