Ripple asks SEC to clarify how Howey Test applies to transactions in XRP over the last 8 years
In the most recent filing, as AZCoin News reported, the United States Securities and Exchange Commission (SEC) has expressed its intention to file a petition to force Ripple to produce relevant video and audio recordings of the meetings between current and former executives and key employees. The latest developments are that the blockchain giant continues to respond, targeting the Howey Test of the SEC.
Ripple wants to know the XRP dealings of SEC employees, but the agency didn’t expect this
The SEC has accused Ripple of not informing the agency about the existence of the said recordings. “Despite the SEC’s request for relevant recordings in its very first document requests to Ripple in January 2021, Ripple never informed the SEC that Ripple routinely recorded staff meetings until a key former employee testified to that in her deposition earlier this month”, the agency stated.
Source: James K. Filan
The employee in question is Antoinette O’Gorman, Ripple’s chief compliance officer, who had revealed during her August 4 deposition that the company had routinely recorded staff meetings. The SEC further stated that the San Francisco-based blockchain declined to confirm whether it had searched for and recorded responsive recordings, even though the SEC had requested it to do so in January.
Furthermore, the SEC considers significantly down the categories of recorded meetings it wanted to gain access to reduce its burden. The SEC also tried to obtain the recordings without the court’s involvement but to no avail. It had accused Ripple of failing to produce or reveal the existence of these recordings even though they were asked to when discovery began.
Reportedly, Ripple has agreed to produce the recordings requested by the SEC but under certain conditions. They want to extend the time until Tuesday, September 7, 2021, to respond to the SEC’s Motion to Compel turnover of video and audio recordings of Ripple staff meetings.
And, those conditions are, the company wants this to be the end of the parties’ discovery-related disputes concerning Ripple’s recordings. They then want the SEC to waive its right to seek production of any additional recordings it may become aware of in the future. This will include upcoming deposits by top executives, including CEO Bradley Garlinghouse and co-founder Chris Larsen.
“Given that Ripple has not produced a single recording to date, Ripple should not be permitted to condition its compliance with its discovery obligations on the SEC’s forbearance of the right to seek documents that the SEC does not yet know of, through no fault of its own,” the SEC responded in its filing.
Later, the SEC also said that the recordings mentioned above were most likely unprivileged documents that would supplement the SEC’s claims against Ripple. “The recordings reveal efforts Ripple took to increase or maintain XRP’s price or to create expectations of profits in potential XRP purchasers, both of which are relevant under Howey to prove whether XRP was offered and sold as a security,” they added.
Ripple’s motion seeks information about employee XRP holdings explicitly. It also aims to find the SEC’s preclearance decisions about XRP, Bitcoin, and Ethereum—that is, data on any policies that may prevent SEC employees from trading in those cryptocurrencies. The motion allows for the SEC to provide the information anonymously, either individually or in aggregate form.
So, how about the Howey Test?
Recently, the blockchain giant and Christian Larsen file a Letter requesting permission to file a Combined Letter Motion regarding an unidentified discovery dispute on which they have reached an impasse with the SEC. Brad Garlinghouse is not a part of this filing.
Source: James K. Filan
Attorney James added that defendants Ripple and Larsen file Motion to Compel the SEC to answer interrogatories identifying the SEC’s theory of how the Howey Test applies to virtually all Defendants’ transactions in XRP over the last eight years. It is unknown where the story will go after this request; let’s wait and see.
The SEC initially took action against Ripple in December 2020, when it alleged that its ongoing sales of the XRP token constituted an unregistered securities offering.
It is still unclear when the lawsuit is likely to end. Recent estimates from Ripple community lawyer Jeremy Hogan suggest that, as AZCoin News reported, a summary judgment will not be reached until early 2022.
Read more:
- SEC Required Ripple To Produce Video And Audio Recordings Of Their Staff Meetings
- Maybe The Lawsuit Between Ripple And The SEC Will Follow This Scenario And Last Until 2022