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Ripple Vs SEC: XRP Files Motion to Seal “Confidential” Documents

Last Updated May 14, 2024 3:18 PM
Eddie Mitchell
Last Updated May 14, 2024 3:18 PM
Key Takeaways
  • Ripple is looking to seal certain documentation ahead of the final judgment on SEC Vs Ripple case.
  • The firm argues it has a right to protect “confidential” aspects of its business and will not affect the outcome of the case.
  • The SEC is expected to file its response by May 20, 2024.

As the lawsuit between the U.S. Securities and Exchange Commission (SEC) draws to a close, Ripple (XRP) has submitted a motion to seal certain documents and request redactions.

Arguing its rights to privacy and confidentiality, Ripple intends to protect itself from “significant harm” that could come if these documents were made public.

The Motion to Seal

As per the filing  from Ripple, the firm is seeking to seal particular documents filed in connection to the SEC’s motion for judgment and remedies. In this,  they are requesting “narrowly tailored redactions” on the Remedies Motion briefing and certain exhibits.

The firm is also asking that “highly sensitive and confidential” information be completely sealed entirely.

Much of the information Ripple is trying to seal relates to the firm’s ongoing business relationships and audited financial statements. The motion writes:

“Ripple’s proposed redactions are narrow and target only the specific financial and pricing terms that Ripple and certain of its past or existing counterparties negotiated, and the Court granted Ripple’s identical or similar proposed redactions in connection with the Summary Judgment and Daubert motions.”

The company first argues that as it is a private company, it has never needed to disclose financial statements, and that the disclosure of said statements would impact its operations negatively. It also contends that publishing financial documents will reveal revenue streams, long-term plans, and its overall condition.

Institutional Buyers Discount

According to pro-XRP lawyer, Bill Morgan, this also means Ripple is potentially looking to seal information regarding discounts offered to institutional XRP investors.

While some see this as suspicious, Morgan notes they have every right to protect this information. Additionally, he notes that the SEC is arguing that Ripple has caused pecuniary harm to institutional investors, and has done so by not disclosing higher discounts to other sophisticated investors. He writes :

“I seriously wonder whether the SEC really believes its own pecuniary harm argument or just made the argument to harm and embarrass Ripple to its institutional customers.

According to a declaration of support  from Ripple’s Chief Financial Officer (CFO), Jonathan Bilich, disclosing this non-public information would be “detrimental” and harm Ripple’s competitiveness. Ripple asserts these statements will have little to no impact on the court’s decision regarding the remedies and judgment.

The SEC is expected to file its opposition to Ripple’s motion to seal by May 20, 2024. After which the courts will decide on whether to grant Ripple’s sealing request ahead of the final judgment.

Stuart Alderoty Hints at Lawsuit Finale

Now that the SEC has filed its concluding response  in the remedies phase of the lawsuit, a significant milestone has been crossed, although not without criticism from Ripple’s Chief Legal Officer (CLO), Stuart Alderoty.

But, this may not be the end of the rivalry as the SEC is now taking aim at Ripple’s stablecoin project, which could set the stage for yet another showdown between the two.

Alderoty Tackles the SEC

After a rather lengthy and confusing legal battle, it appears as though we may finally see the case closed on the SEC’s lawsuit against Ripple. According to Alderoty, the SEC has overplayed its hand.

Alderoty goes on to note that the SEC couldn’t “sink any lower”, criticizing the regulator’s overreach and disregard for crypto regulations in jurisdictions outside of the U.S., writing:

“[…] if you are a financial regulator outside the U.S. and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of fishing licenses.

What’s notable, is that in the first three years of Gary Genslery’s time as SEC chair, the agency had been sued for abusing its rulemaking powers more than it had in the 10+ years prior to his appointment.

The SEC also disagreed with the company’s assurance that it will not violate U.S. securities laws as it already has licenses in other jurisdictions, to which the SEC wrote :

This argument—akin to saying a New York restaurant need not obtain a liquor license because it obtained a fishing license in California—is absurd.

In their final reply, the SEC challenged Ripple’s claim that it acted without recklessness, arguing there should be no “widespread uncertainty” about the legal status of XRP, which it acknowledges the court had already rejected the “fair notice” defense.

The SEC is seeking almost $2 billion in fines from Ripple. However, the most important result of the case, is whether or not XRP is a security, which could determine the future outcome of other legal battles, as well as the future of the crypto industry in the U.S.

SEC Vs Ripple Stablecoin

In the May 7th brief, the SEC also described  Ripple’s planned stablecoin  as an “unregistered crypto asset” before it had even launched.

What’s odd, is that the SEC argues that Ripple’s intentions to launch a stablecoin demonstrate a continuous disregard for the law and that only a permanent injunction could prevent them from resuming their unregulated activities.

Ripple says that the stablecoin will come with a “compliance-first mindset”, which is backed up by Ripple and its subsidiaries collectively holding several licenses and dozens of money transmitter licenses. This includes a New York BitLicense and others from the Central Bank of Ireland and the Monetary Authority of Singapore.

Is XRP a Security?

Until the final judgment is made, this most pertinent question will remain unanswered. But, many observers and legal experts are pretty bullish on how things have played out.

The final judgment decision is expected to be announced in September 2024. Until that time, the future of cryptocurrencies, and the outcome of the SEC’s numerous ongoing lawsuits against crypto hang in the balance.

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