XRP lawsuit: The SEC refuses to release papers to Ripple, citing privilege and irrelevance.

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The Securities and Exchange Commission [SEC] filed their “Letter Brief” addressing the list of internal papers, which the agency said were protected by the deliberative process privilege [DPP] and attorney-client privilege. According to attorney James K. Filan’s brief, the SEC asserted that “every single document that will be reviewed in-camera by Judge Netburn is private.”

While the SEC cited many papers demanded by Ripple and the court in connection with the ongoing dispute, it also stated that,

“…the documents are irrelevant to Defendants’ proposed defenses—even under Defendants’ relevance theory. Defendants seek the documents to put on a (wholly improper) defense that ‘the SEC staff…questioned whether XRP and other digital assets were securities’ and therefore that Defendants are not liable. Motion at 4. But none of the documents on Appendix A, except for Entry 2, address whether transactions in XRP are securities.”

The SEC further noted that there was no jurisdiction to override the DPP. The only time DPP may be overcome is by showing that disclosure outweighs the interests in nondisclosures. Citing Export-Import Bank v. Asia Pulp & Paper Co., Ltd. the SEC noted that the court must consider the following factors, before overriding a DPP.

“1) the relevance of the privileged evidence;
2) the availability of other evidence;
3) the seriousness of the litigation;
4)the government’s role in the litigation; and
5) the possibility of future timidity by government employees.”

The SEC stated that the present brief concentrated on the first and fifth considerations, “both of which significantly support nondisclosure.” Meanwhile, they emphasised that none of the referenced documents addressed the application of the Howey test to XRP. It also didn’t say whether it was acceptable to consider XRP transactions to be securities transactions.

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The SEC added,

“Rather, the documents largely relate to other regulatory issues. As in this case, transactions in digital assets may raise issues relating to the registration requirements of Section 5 of the  Securities Act of 1933 and whether the transactions constitute offers and sales of investment contracts under the Howey test. But transactions in digital assets, as with any other financial instrument, raise any other issues under the federal securities laws.”

In essence, the SEC wanted to keep Ripple from accessing papers that were “predecisional and deliberative” in the planned in-camera examination. SEC persisted in establishing the DPP, hoping that Judge Netburn would analyse the records and make a decision before turning anything over to Ripple.

The litigation has been proceeding since December and is still in the early stages of discovery. The ongoing back and forth between Ripple and the SEC has delayed the fact-finding phase, which was intended to end on August 31st.

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