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Ripple wins access to SEC discussions on defining crypto assets as securities

  • Posted On - 2021-04-07 06:17:03

Ripple Labs has been given access to the U.S. Securities and Exchange Commission (SEC) documents “expressing the agency’s interpretation or views” on the crypto assets.

As per the Law360, United States Magistrate Judge Sarah Netburn permitted the defendants’ motion “in large part,'' determining that SEC minutes or memos concerning crypto are likely discoverable. Judge staff-to-staff email communications do not need to be created.

The Magistrate Judge also allowed for the SEC and Ripple to raise debate with the ruling.

In the last month of 2020, the Securities and Exchange Commission filed a lawsuit alleging Ripple Labs, its chairman Christian Larsen and CEO Brad Garlinghouse,  increased $1.38 billion by unlicensed security offering in August 2013.

Ripple has challenged the SEC’s suit, claiming that XRP is similar to Bitcoin or Ethereum — both of which have been categorized as commodities by the SEC, in addition to criticizing the 8 years taken for the agency to file its complaint against Ripple.

Law360 reports that CEO’s counsel, Matthew Solomon, believes it may be “game over” for the SEC’s suit should they find proofs the regulator has deemed XRP similar to BTC or ETH, noting the SEC’s regulatory purview does not extend beyond securities.

With the SEC having taken 8 years to file its complaint against Ripple, the firm’s lawyers also believe they can erod the SEC’s claims should they be able to produce documentation showing contradictory determinations as to the regulator’s categorization of XRP.

“We need this discovery to defend ourselves,” Matthew said.

However, SEC counsel Dugan Bliss has criticized the defendants for seeking to put the commission “on trial” by scrutinizing its internal deliberations, rather than defending its allegedly illicit actions, stating:

“The actions of the promoter are what need to be the focus here.”

During the proceedings, Sarah Netburn noted significant public interest in the hearing, with more than 500 individuals having dialed in through a public phone number to observe the case. The judge also warned one individual for rebroadcasting audio from the hearing in violation of New York regulations.

“Whoever is engaging in this conduct may be subject to criminal sanctions,” Sarah Netburn stated.

Outside of court

On 6 April, attorney Jeremy Hogan, who is observing the case with interest, took to Twitter to share a 2016 cease-and-desist order aimed at a then-advisor to Ripple Labs that described the firm as a “digital currency company.”

“The SEC must now explain to the Court how a ‘digital currency’ transformed to a ‘digital security,’” added attorney Jeremy.

The price of XRP has been on a tear this month despite the SEC’s complaint, with the token up nearly 100% since the start of April.  XRP is up roughly 20% over the past 24 hours and is currently trading for $1.08.