Ripple Labs Requests Information About Possible SEC Employees’ XRP Holdings
Ripple Labs and the US Securities and Exchange Commission (SEC) have been in the midst of a lengthy securities fraud battle since last year, with each party drawing points in the case.
In the latest twist to the legal tussle, Ripple Labs has now requested information from the securities regulator’s own employees.
Trading an Unregistered Security
Earlier this week, James Filian, an attorney who currently follows the legal battle between Ripple Labs and the SEC, announced that the blockchain giant had requested information into the agency’s employees and their XRP holdings.
In a tweet, Filian shared a copy of Ripple’s motion, which seeks to establish whether the SEC cleared its employees to trade XRP.
The motion itself was filed with the U.S. District Court for the Southern District of New York on behalf of Ripple Labs and two of its top executives and co-defendants Bradley Garlinghouse and Chris Larsen.
The document points out that the SEC had previously not taken a regulatory position on securities transactions and only did this on Jan. 19, 2018. During the five-year hiatus, SEC employees were able to buy, sell, and store XRP without any restriction from the regulator.
As the motion document showed, it seeks to get anonymized documents reflecting “trading preclearance decisions” for XRP – as well as Bitcoin and Ether. BTC -3.93% Bitcoin / USD BTCUSD $ 42,711.13
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Considering that the SEC has deemed XRP unregistered security, records of employees having holdings in the asset could put the agency in a compromising position. The defendants added that all their efforts to get these records have proved futile, and a court order seems like the only way.
Filian added that the SEC has until September 3 to respond to the order. He pointed out that with the order being “text-only,” it was the only one filed by the defendants.
Continuing the Months-Long Tit-for-Tat
The Ripple Labs motion comes on the back of a request from the SEC to receive terabytes of internal communication records between Ripple employees. In a motion with the Southern District Court of New York earlier this month, the SEC requested Slack communication records between Ripple employees and executives.
Specifically, the SEC explained that Ripple’s previous Slack communication records were incomplete. Ripple itself admitted that this was due to a “data processing mistake,” although the securities watchdog believes that the company is hiding communications records on purpose. The SEC added that these incomplete records had affected its depositions, which already spanned 11 employees.
The SEC also pointed out that the previous messages submitted had yielded “critically important information” that wasn’t in emails or other communication channels. The remaining records will help its investigations and contribute to its case.
Jeremy Hogan, a popular attorney within the XRP community, has pointed out that the SEC is looking to establish XRP as a security that would immediately fall under its purview.
“It is attacking from the flank and arguing Ripple marketed and treated XRP like a security, and therefore it is. The SEC has had some success with this argument in the past and it makes sense as a strategy since in all substantive ways XRP is NOT a security.”
With Ripple and its executives going on the offensive again, the market will continue to watch how this legal tussle unfolds.