In the SEC v. Ripple Lab’s litigation, both the US Securities and Exchange Commission and Ripple Labs are having opposite views over the SEC’s internal papers, with the SEC claiming deliberative process privilege (DPP) and Ripple attempting to be kind for its “fair notice” position.
The SEC’s use of DPP, protecting internal information of the government agency such as recommendations and analyses involved in a government decision or policy from disclosure during litigation, was challenged by defense attorneys representing Ripple, CEO Brad Garlinghouse, and executive chairman Chris Larsen wrote in a letter to Sarah Netburn, U.S. Magistrate Judge.
Ripple’s attorneys argued that former SEC director William Hinman’s testimony and the SEC’s internal documents would understate allegations by SEC that the Individual Defendants failed to recognize XRP sales as unregistered securities Ripple’s sales.
Personal views by Hinman
The defense attorney of Ripple mentioned that Hinman, in a recent deposition, admitted that the application of laws by the federal securities on digital assets is quite new, and hardly anyone got the idea regarding the same. This was before he joined the SEC in 2017 — but years after Ripple’s alleged unregistered securities offering.
Ripple’s defense attorneys wrote in a footnote that the SEC “repeatedly misjudged Mr. Hinman’s deposition testimony and Ripple’s counsel’s suit striking no-response.” Referring to the SEC’s inputs in its Aug. 17 letter written to Netburn mentioned Ripple moved to record the testimony by Hinman confessing the latter met with the former representatives. Upon meeting, Hinman said about Ripple’s sales of XRP to be sales of securities.
Importance of Internal Document
Ripple’s sale of XRP constituted an unregistered securities offering worth more than US$1.38 billion, according to the SEC, which filed its complaint against Ripple. CEO Brad Garlinghouse and executive chairman Chris Larsen from Ripple have also been listed as co-defendants by the SEC for allegedly aiding and abetting Ripple’s violations.
The case is around whether XRP transactions are “investment contracts” and securities that must be registered under Section 5 of the Securities Act of 1933. The result of SEC’s action against Ripple, as well as the decision of XRP’s classification, is being keenly followed by crypto businesses and investors alike, as it might have far-reaching consequences for the Cryptocurrency sector.