Ripple Vs SEC: XRP Fight to Keep “Confidential” Documents Sealed Ongoing

• The SEC dismissed Ripple’s motion to seal documents, resulting in a fresh dispute.
• Ripple has argued that the disclosure of its financial condition is irrelevant.
• The SEC is seeking $2 billion in fines, but Ripple argues that it only owes $10 million.

The lawsuit between the U.S. Securities and Exchange Commission (SEC) and RippleLabs was thought to have been coming to a close, but the latest disagreements could see it extended.

Following Ripple’s motion to seal certain documents to protect its business integrity, the SEC has argued that these are essential for the court’s analysis. Now, in their latest filing, Ripple disputes this.

Back and Forth

As per a post from defense lawyer James K. Filan, Ripple has responded to the SEC’s assertion that XRP’s financial status is vital to the court’s determination on remedies.

In its response on May 20, the SEC called  for the court to dismiss Ripple’s request. Arguing that, amongst other things, Ripple’s current assets, recent sales figures, revenues, and expenses, as well as the discounts given to institutional investors, are pertinent to assessing remedies. Notably, the SEC accused Ripple of intending to hide the extent of these “discriminatory” discounts.

In its latest response supporting its motion to seal, Ripple disagrees and clarifies that it is not arguing that it is unable to pay any measured penalty, and therefore, the firm’s current financial status is irrelevant to the court’s analysis, adding:

“The SEC should not be able to force disclosure of Ripple’s highly sensitive confidential financial information merely by raising arguments that have no basis, especially where the court can reject those arguments without considering any of the highly confidential facts,”

Ripple also addresses the SEC’s assertion that past sales contracts are relevant, pointing at that the court ruled that XRP is not a security, which distinguishes it from the sale of investment contracts, writing:

“[…]and so the price at which Ripple sold XRP was not the same as the price at which Ripple sold the investment contracts described in the Court’s summary judgment order.”

With these arguments, Ripple is urging the court to grant its “narrowly tailored” request to seal sensitive information.

The Motion to Seal

Arguing its rights to privacy and confidentiality, Ripple intends to protect itself from “significant harm” that could come if these documents were made public.

As per the filing  from Ripple, the firm is seeking to seal particular documents filed in connection to the SEC’s motion for judgment and remedies. In this,  they are requesting “narrowly tailored redactions” on the Remedies Motion briefing and certain exhibits.

The firm is also asking that “highly sensitive and confidential” information be completely sealed entirely.

Much of the information Ripple is trying to seal relates to the firm’s ongoing business relationships and audited financial statements. The motion writes:

“Ripple’s proposed redactions are narrow and target only the specific financial and pricing terms that Ripple and certain of its past or existing counterparties negotiated, and the Court granted Ripple’s identical or similar proposed redactions in connection with the Summary Judgment and Daubert motions.”

The company first argues that as it is a private company, it has never needed to disclose financial statements, and that the disclosure of said statements would impact its operations negatively. It also contends that publishing financial documents will reveal revenue streams, long-term plans, and its overall condition.

Institutional Buyers Discount

According to pro-XRP lawyer Bill Morgan, this also means Ripple is potentially looking to seal information regarding discounts offered to institutional XRP investors.

While some see this as suspicious, Morgan notes they have every right to protect this information. Additionally, he notes that the SEC is arguing that Ripple has caused pecuniary harm to institutional investors, and has done so by not disclosing higher discounts to other sophisticated investors. He writes :

“I seriously wonder whether the SEC really believes its own pecuniary harm argument or just made the argument to harm and embarrass Ripple to its institutional customers.“

According to a declaration of support  from Ripple’s Chief Financial Officer (CFO), Jonathan Bilich, disclosing this non-public information would be “detrimental” and harm Ripple’s competitiveness. Ripple asserts these statements will have little to no impact on the court’s decision regarding the remedies and judgment.

The SEC is expected to file its opposition to Ripple’s motion to seal by May 20, 2024. After this, the courts will decide whether to grant Ripple’s sealing request ahead of the final judgment.

Stuart Alderoty Hints at Lawsuit Finale

Now that the SEC has filed its concluding response  in the remedies phase of the lawsuit, a significant milestone has been crossed, although not without criticism from Ripple’s Chief Legal Officer (CLO), Stuart Alderoty.

But, this may not be the end of the rivalry as the SEC is now taking aim at Ripple’s stablecoin project, which could set the stage for yet another showdown between the two.

Alderoty Tackles the SEC

After a rather lengthy and confusing legal battle, it appears as though we may finally see the case closed on the SEC’s lawsuit against Ripple. According to Alderoty, the SEC has overplayed its hand.

Alderoty goes on to note that the SEC couldn’t “sink any lower”, criticizing the regulator’s overreach and disregard for crypto regulations in jurisdictions outside of the U.S., writing:

“[…] if you are a financial regulator outside the U.S. and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of fishing licenses.“

What’s notable, is that in the first three years of Gary Genslery’s time as SEC chair, the agency had been sued for abusing its rulemaking powers more than it had in the 10+ years prior to his appointment.

The SEC also disagreed with the company’s assurance that it will not violate U.S. securities laws as it already has licenses in other jurisdictions, to which the SEC wrote :

“This argument—akin to saying a New York restaurant need not obtain a liquor license because it obtained a fishing license in California—is absurd.“

In their final reply, the SEC challenged Ripple’s claim that it acted without recklessness, arguing there should be no “widespread uncertainty” about the legal status of XRP, which it acknowledges the court had already rejected the “fair notice” defense.

The SEC is seeking almost $2 billion in fines from Ripple. However, the most important result of the case, is whether or not XRP is a security, which could determine the future outcome of other legal battles, as well as the future of the crypto industry in the U.S.

SEC Vs Ripple Stablecoin

In the May 7th brief, the SEC also described  Ripple’s planned stablecoin  as an “unregistered crypto asset” before it had even launched.

What’s odd, is that the SEC argues that Ripple’s intentions to launch a stablecoin demonstrate a continuous disregard for the law and that only a permanent injunction could prevent them from resuming their unregulated activities.

Ripple says that the stablecoin will come with a “compliance-first mindset”, which is backed up by Ripple and its subsidiaries collectively holding several licenses and dozens of money transmitter licenses. This includes a New York BitLicense and others from the Central Bank of Ireland and the Monetary Authority of Singapore.

Is XRP a Security?

Until the final judgment is made, this most pertinent question will remain unanswered. But, many observers and legal experts are pretty bullish on how things have played out.

The final judgment decision is expected to be announced in September 2024. Until that time, the future of cryptocurrencies, and the outcome of the SEC’s numerous ongoing lawsuits against crypto hang in the balance.

About the Author

Eddie Mitchell

Eddie has been writing news and content primarily for crypto news and industry players over the past seven years. With an eye for the bigger picture, Eddie prefers to investigate the broader implications of a story, as well as explore the weird and wonderful world of crypto. He believes blockchain has already changed the world, but observes the space overall with a skeptical and adoring eye.

See more

[email protected]