SEC Scores Minor Victory Against Ripple As Court Rejects Employee Trading History Motion
The ongoing legal bouts between blockchain company Ripple Labs and the US Securities and Exchange Commission (SEC) have seen both parties scoring decisive points.
The latest winner is the federal regulator which has dodged a bullet as the cross-border payment company’s request for its employees’ data has been denied.
Ripple Motion Denied
In a federal transcript, the presiding federal judge of the SEC vs. Ripple and Defendants case Sarah Netburn denied a motion filed by the software company. The motion which was filed on August 27 requested that the court ask the SEC to present its employees’ crypto trading activities to see if they held or sold Ripple’s XRP during the highlighted period.
As pointed out in the transcript, the defendants made this attempt in a bid to highlight the SEC’s regulatory fogginess concerning XRP and to show that the government agency only considered XRP a “security” following its Dec. 2020 lawsuit. This would damage the SEC’s case against the digital payments firm and affirm their resolve that XRP is not a security.
However, Judge Netburn noted that the motion was denied on a number of counts.
According to her, the preclearance decision process does not show that the SEC Ethics Counsel had determined that a particular trade complies with the stipulated securities laws. This means that the Ethics Counsel did not expressly make any provision during the said period that was relevant to XRP’s legality.
Another key argument she raised was that the court was not legally authorized to grant Ripple’s request. This is due to the federal rule that protects the privacy rights of the agency’s employees from public scrutiny. The document clarified,
“As to the annual certifications that Defendants seek, Congress has presumptively prohibited disclosure of such financial information through federal privacy statutes and regulations in order to maintain government employees’ privacy.”
SEC Still Obligated To Meet Defendant’s Demands
The SEC’s legal tussle has been ongoing for months now with Ripple and co-defendants Brad Garlinghouse (CEO) and Chris Larsen (Chairman) refusing to back down. With the prospects of a settlement becoming thinner by every court appearance, both contending parties are out to get a positive ruling on their position.
Ripple has denied the SEC’s accusations noting that it has not bridged any known securities through XRP trading. The SEC thinks otherwise.
Meanwhile, the recent victory for the SEC is not without a catch. In closing remarks, Judge Netburn pointed out that the federal regulator has not been cooperative with the defendants in the discovery phase.
In the transcript, the SEC noted that it placed XRP on a “watch list” in 2018, with SEC employees barred from trading the asset the following year. Ripple noted that the government agency has refused to produce documents reflecting this.
Judge Netburn asked the agency to produce the needed documents that its employees could no longer trade the asset.