SEC Scores Major Win Against Ripple in Ongoing Lawsuit

The Securities and Exchange Commission (SEC) has secured a significant ruling in its favor in the ongoing lawsuit against Ripple Labs, the company behind the cryptocurrency XRP. The court has granted the SEC’s motion to compel Ripple to produce key financial documents and answer an important question regarding its XRP sales.

The SEC filed a lawsuit against Ripple in December 2020, alleging that the company and its executives had raised over $1.3 billion through an unregistered, ongoing digital asset securities offering of XRP. Ripple has denied the allegations, arguing that XRP is not a security but a medium of exchange.

The case has attracted a lot of attention from the crypto community, as it could have major implications for the status and regulation of cryptocurrencies in the US. The court’s latest ruling is a setback for Ripple, as it will have to disclose sensitive information that could strengthen the SEC’s case.

According to the court order, Ripple must provide the SEC with its financial statements for 2022-2023, which the SEC claims are essential for determining an appropriate remedy in the event of a judgment in its favor. Ripple had argued that its financial health was irrelevant and highly confidential, but the court disagreed and found that this information was potentially probative to the remedy stage.

Ripple must also answer an additional interrogatory on the proceeds from its institutional XRP sales after the initial complaint was filed. The SEC argues that this information could help in calculating any disgorgement, which is the repayment of ill-gotten gains. Ripple had objected to this request, saying that it was irrelevant and burdensome, but the court found that the SEC had sufficiently shown that this information could assist in crafting an appropriate remedy.

The court also ordered Ripple to produce any post-complaint contracts it entered into with third parties regarding XRP. The SEC had requested this information to show that Ripple continued to offer and sell XRP as a security after the complaint was filed. Ripple had contended that the SEC’s request was untimely and previously barred by the court’s ruling in June 2021. However, the court clarified that the earlier denial was contextual, tied to expert merits discovery, and not controlling in the current matter.

The court’s ruling is a major win for the SEC, as it will give it access to crucial evidence that could support its allegations against Ripple. The ruling also shows that the court is taking a broad and thorough approach to the discovery process, which could prolong the litigation and increase the pressure on Ripple to settle. The case is expected to go to trial in early 2024, unless the parties reach a resolution before then.

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