The ongoing SEC vs. Ripple lawsuit sees the defendants file a motion to compel the U.S securities regulator to produce documentation regarding its “trading preclearance decisions” for XRP, Bitcoin, and Ether. As well as documents regarding the XRP holdings of SEC employees.
“Defendants seek production of anonymized documents reflecting trading preclearance decisions with regard to XRP, bitcoin and ether, or alternatively, for that information to be produced in aggregate form.”
The letter confirmed that the defendants had previously sought this information on four other occasions but “without progress.”
Why does Ripple want this information?
According to the defendant’s legal representation, Ripple wants to understand the SEC’s trading policies around trading “governing digital assets,” and whether the regulator allowed its employees to trade XRP.
In June 2021, the court granted Ripple’s motion to compel the SEC to produce such documentation. The regulator duly provided a January 2018 dated policy named “Ethics Guidance Regarding Digital Assets.”
It showed that, until January 2018, the SEC had not restricted its staff from trading in cryptocurrencies. This, Ripple states, is consistent with the view that the SEC did not see digital assets, in general, as securities.
In December 2020, the beginning of the lawsuit, the SEC alleged Ripple had illegally sold $1.3 billion of unregistered securities since 2013.
However, Ripple argues that the SEC digital asset policy undermines the entire premise of the lawsuit. In that, before January 2018, the SEC did not restrict staff from trading XRP. It follows that the agency must not have had any conclusive view that XRP is indeed a security.
As such, to accuse Ripple of securities fraud going back to 2013 is at best inconsistent with staff policy. And at worst, an ill-conceived attempt to attack the crypto industry through Ripple.
The SEC did not expect this
As has gone the way of previous crypto-based securities lawsuits, for example, the Telegram case, which effectively ended the launch of the TON token, the SEC likely thought the Ripple lawsuit was “in the bag.”
However, the longer the Ripple case has gone on, the stronger their defense has gotten. In her most recent comments on the lawsuit, Roslyn Layton said the SEC underestimated the uprising they now face due to the Ripple lawsuit.
Having summarised the situation to date, she concluded by implying a massive loss of credibility for the agency and its recently appointed chairman, Gary Gensler.
“As the discovery phase draws to an end and the public backlash intensifies, one wonders why SEC Chairman Gary Gensler would continue risking his legacy on taking the Ripple case to trial.”
Layton ended by rhetorically asking if the SEC and Gensler can afford to continue jabbing at the crypto industry and its supporters.
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