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Since exchanging a few Memorandums of Law in recent days, Ripple’s legal dispute with the US Securities and Exchange Commission now threatens to drag on for weeks or months. In terms of XRP, the cryptocurrency at the heart of this lawsuit, it has seen a 16 percent drop in the last week alone.
The SEC recently requested an informal meeting to review all of Ripple’s previous legal counsel, with the department urging the court to order the defendants to submit all appropriate information. The SEC plans to use this as a litmus test to determine if Ripple’s XRP offerings and sales were in accordance with federal securities laws. The SEC also said that it was within its powers to do so.
The regulatory watchdog provided two reasons for its “extraordinary” request at the time.
However, in its answer letter, Ripple Labs now claims that none of them had validity and that the SEC’s case is incorrect on both the law and the evidence. The defendant firm argued that the alleged “selective disclosures” relied on by the SEC were all made outside of the context of the case.
Ripple also stated that all relating issues that were not revealed would remain private, and that it had done nothing to reintroduce the already-waived correspondence into the case.
The SEC had already claimed that Ripple had put the legal advice it offered in jeopardy by claiming that the company “reasonably understood” that federal securities regulations did not extend to its XRP offerings and transactions, and therefore waived immunity over the advice it received. In turn, Ripple claimed that the SEC’s statement misrepresented the facts of the case, Ripple’s protection, and the applicable rule. The defendants’ letter continued,
“The SEC attempts to brush off the fact that it is the party attempting to put legal advice at issue by pointing instead to Ripple’s affirmative defense of fair notice, which the SEC argues waives privilege because Ripple allegedly received adequate notice from its lawyers… This misstates the law both as to privilege waiver and as to fair notice.”
According to Ripple, the SEC’s simple suspicion that privileged guidance to them could jeopardise their fair notice argument is inadequate to force disclosure of privileged materials. Ripple, unsurprisingly, even sought to pressure the SEC to create its own internal correspondence. According to the above message,
“Ripple’s non-privileged internal communications about XRP are discoverable, just as the SEC’s are; and Ripple has not resisted producing such communications. But none of that puts legal advice that Ripple received at issue in this case.”
The defendants’ letter accused the administrative watchdog of framing Ripple, claiming that the SEC frequently and misleadingly threatened to reframe Ripple’s affirmative defence by claiming that the blockchain corporation “reasonably understood” federal protection laws. The letter added, emphasising the same,
“Whether Ripple subjectively believed that its actions were lawful or unlawful does not matter.”
The defendants concluded that there is no legal reason for the SEC to extort intelligence, and the blockchain company went on to send,
“Contrary to the SEC’s assertion, Ripple has not attempted to “artfully plead” a good faith defense. There is no basis to grant the SEC’s request to order Ripple to produce privileged communications beyond those it disclosed six years ago outside of litigation.”