SEC sought info on Ripple and XRP from 20 foreign entities for lawsuit

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The U.S. Securities and Exchange Commission says the use of requests to foreign regulators is “particularly important” in the SEC v. Ripple lawsuit as it has not been able to obtain much information on XRP from Ripple, according to a new legal filing.

Earlier this month, Ripple demanded that the SEC stop asking foreign regulators for information on Ripple and XRP. But the SEC is now arguing that Ripple’s request was “devoid of any legal authority” and that its discovery requests to foreign regulators were proper, according to a new letter submitted by SEC attorney Jorge Tenreiro to U.S. Magistrate Judge Sarah Netburn.

The SEC contends that there is legal precedent for it to use “Requests for Assistance” during civil litigation “because they are requests — not subpoenas enforceable by federal courts — and therefore not prohibited by the Federal Rules of Civil Procedure.”

Tenreiro added that the SEC had already agreed to provide the defendants — Ripple Labs, its CEO Brad Garlinghouse and executive chairman Chris Larsen — with documents obtained from third parties and a list of categories of documents the SEC had requested from the foreign authorities. 

“Fairness requires no more, and an opinion curtailing the use of Requests or requiring the disclosure of communications with foreign regulators could have broad adverse implications for the SEC across a wide array of governmental actions where the agency pursues cross- border cooperation to protect the United States’ capital markets and its investors,” Tenreiro wrote.

He added that the “Defendants have access to all of the documents obtained by the SEC and a full opportunity to challenge their admissibility in court. There is no reason to prevent the development of a full factual record. Defendants’ request should be denied.”

The SEC’s new legal filing is a response to Ripple’s request earlier this month asking the judge to stop the SEC from using Memoranda of Understanding (“MOU”) requests to foreign regulators for discovery on information about Ripple and XRP — the native cryptocurrency of the XRP Ledger created by Ripple Labs. Ripple had argued that the SEC’s use of MOU requests for discovery was outside the scope of the  Federal Rules Of Civil Procedure and constituted an “end-run around this Court.”

“The MOU process involves a foreign securities regulator in the discovery process, which has a significant impact on the recipient of the requests, including Ripple’s overseas business partners, and amounts to an unwarranted intimidation tactic,” Ripple’s lawyers wrote in their April 16 letter to the judge. 

But SEC is now shooting back at Ripple, saying “Baseless accusations of impropriety may make for good headlines, but do not establish prejudice.” 

Tenreiro also pointed out that the SEC was not the only party to the case that had sought documents using means other than Rule 45 subpoenas, highlighting that Ripple had filed Freedom of Information Act requests for documents relating to Bitcoin, Ether and XRP.

“Unlike the Requests, FOIA requests require the SEC to produce certain documents and may be pursued in court, even while, as here, the parties are litigating the very same issue before this Court,” Tenreiro wrote. “Thus, Defendants’ contention that the SEC is gathering documents outside of this ‘Court’s authority to oversee’ discovery… is disingenuous.”

See related article: Ripple accuses SEC of ‘intimidation tactic’ in seeking XRP info overseas

The letter to Judge Netburn is the latest front in the battle over discovery in the SEC’s lawsuit against Ripple, with each side trying to limit what information must be shared with the opposing party. 

Last December, the SEC filed a lawsuit against Ripple alleging that its sale of XRP was an unregistered securities offering worth over US$1.38 billion. The SEC also named Ripple’s executive chairman Chris Larsen and CEO Brad Garlinghouse as co-defendants for allegedly aiding and abetting Ripple’s violations and making US$600 million in personal profits from their unregistered sales of XRP. 

At the heart of the lawsuit is whether transactions involving XRP constitute “investment contracts” and therefore securities subject to registration under Section 5 of the Securities Act of 1933. 

See related article: SEC seeks to knock out Ripple defense, says no duty to warn over XRP

SEC’s use of voluntary requests 

In its letter to the judge, the SEC explained that it sends and receives hundreds of requests for assistance at all stages of the enforcement process — from investigations to post-judgment asset allocation, including matters in litigation.

Over 4,000 information sharing exchanges have been made annually in the last three years by signatories to the International Organization of Securities Commissions’ (IOSCO) “Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU),” according to the SEC.

The MMOU is a non-binding information-sharing arrangement and the MMoU’s 124 signatories include the SEC and the U.S. Commodity Futures Trading Commission.

The Monetary Authority of Singapore (MAS) — one of the regulators identified by Ripple as having received an MOU request from the SEC — declined to discuss the particulars when asked about it.

“As requests for assistance under an MOU are confidential, MAS cannot confirm the aforementioned,” the Monetary Authority of Singapore told Forkast.News in an email. “MAS will assess any request for assistance from our foreign counterparts and where possible, will render assistance.”

SEC asked foreign regulators, companies and one investor

So far, the SEC has issued 11 requests to nine foreign regulators, covering approximately 20 entities — including 14 digital asset trading platforms, five companies that Ripple has said use XRP in its “On-Demand Liquidity,” and one investor who bought XRP directly from Ripple — for this lawsuit, according to the SEC. Two foreign regulators, which the SEC did not identify, refused to provide assistance. 

Tenreiro explained such requests were important as they provided the SEC with information that was not obtainable either from Ripple or another third party. The SEC had made requests to digital asset trading platforms as the platforms “apparently have sole possession of intraday XRP trade data for Ripple’s XRP sales for certain time periods” — data that is critical to establishing whether Ripple’s announcements influenced XRP price moves.

In addition, the requests involved “hundreds of millions of XRP that, based on the SEC’s forensic analysis of digital asset wallet addresses, the Individual Defendants apparently transferred (either directly or indirectly) to at least a dozen platforms (in addition to various United States platforms).”

“The Individual Defendants have not turned over a single document concerning a non-U.S. domiciled digital asset account or otherwise explained the significance of these XRP transfers,” the SEC told the court.

The SEC also complained about Ripple’s “cursory approach” towards litigation. “Defendants’ approach to the meet-and-confer process discourages cooperation, threatens to require the Court’s intervention on virtually every discovery dispute, and will impede a timely resolution of this matter based on the full merits,” Tenreiro wrote. 

This is not the first time that the SEC is complaining about Ripple’s “improper discovery demands.” Last week, the SEC filed a motion asking the judge to bar the defendants from seeking irrelevant, privileged SEC staff materials that the Court had already ruled were not discoverable. 

Earlier this month, Judge Netburn had ruled to grant Ripple access to communications between the SEC and third-parties regarding Bitcoin, Ether and XRP. Netburn excluded SEC-to-SEC internal email communications from discovery, but ruled that internal memos being sent up to higher-ranking officials expressing the SEC’s interpretation or views could be discoverable.

Also earlier this month, Judge Netburn rejected the SEC’s demand for up to eight years of personal financial information of Chris Larsen, Ripple’s co-founder and executive chairman, and Brad Garlinghouse, Ripple’s chief executive officer. 

See related article: XRP price surges over 40% following another legal victory for Ripple

A discovery conference with Judge Netburn is scheduled for April 30. 

See related article:SEC seeks to knock out Ripple defense, says no duty to warn over XRP


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