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In Ripple Case SEC Now Requests Records of All Legal Advice on XRP Compliance with Law

By Matthew Russell Lee, Patreon
BBC - Guardian UK - Honduras - ESPN

SDNY COURTHOUSE, May 7 – In SEC v. Ripple Labs Inc. et al., a discovery hearing was held on April 30 before U.S. District Court for the Southern District of New York Magistrate Judge Netburn. Inner City Press live tweeted it, see below, then put underlying emails on Patreon here.

 On May 6, Judge Netburn issued an order: "ORDER granting in part and denying in part [126] Letter Motion for Discovery. Having reviewed the parties' submissions, the Court makes the following clarifications: (1)The SEC must produce communications with third-parties, including external agencies and market participants, subject to a privilege assertion. (2)The SEC need not produce informal intra-agency communications, such as emails, and such communications need not be searched or logged. (3)Intra-agency memoranda or formal position papers discussing Bitcoin, Ethereum, and XRP must be searched for and produced subject to a privilege assertion. Examples of such documents include Division reports, final reports of internal working groups, or formal position papers submitted to the Commissioners. Although such documents may ultimately be privileged, information that would be provided on a privilege log, such as dates and participants, may itself be relevant and is discoverable. (4)Any documents withheld on the basis of privilege must be identified on a privilege log. (5)The Court directs the parties to continue to meet-and-confer on the remaining issues presented in their letters. Respectfully, the Clerk of Court is directed to GRANT in PART the motion at ECF No. 126. (Signed by Magistrate Judge Sarah Netburn on 5/6/2021)."

On May 7, the SEC asked Judge Netburn for a conference to ask for an order compelling Ripple to "produce documents... discussing any legal advice Ripple sought or received as to whether Ripple's offers and sales of XRP were or would be subject to, and incompliance with, the federal securities laws." Then many exhibits are withheld. Watch this site.

From April 30: Netburn: There is not much case law in this area. [That's an understatement.]

Judge Netburn: The SEC's request to a foreign party could be rejected. But once a foreign regulator gets involved, it may be more compulsory.

 Lawyer: These are binding agreements, part of international law. It's not just the SEC calling up and saying, Could you help us? There is a treaty. That's not a request. It's back by the weight and power of the US government. Defendants don't have the same power.

 Lawyer: There should be a level playing field. Once the litigation beings, the SEC should play by the same rules we have do - the Hague Convention, letters rogatory. The SEC has to abide by this.

 Judge: If you agree you and the SEC could use the Hague Convention, what's the difference between that and the SEC's MOU, except that it's a bit easier for the SEC?

Lawyer: We only found out because a foreign party told the company and we raised it to the SEC

Lawyer: Under the Hague Convention, they'd have to make the request to you and we'd see it. Here, the SEC is operating outside the supervision of the court, in secret.

Lawyer: The SEC rushed at the end of the year, as the Administration was turning over. Now they have to play by the rules.

Lawyer 2: Once the SEC files a complaint, they are subject to the Court's rules. They are evading that to conduct extensive intl discovery

 Lawyer 2: The SEC can skew the evidence by limiting what they ask for. Domestically, we see the subpoena first and can add our own request. Same internationally on letters rogatory. But that's not the case on int'l MOUs. And that's critical.

 Lawyer 2: The SEC has asked for critical information from 13 sources, about the impacts of Ripple's announcement, the connection to market movements. But they couched the request to get only the info they think supports their argument.

Lawyer 2: We need info on all sales and RPX, back to 2013. That information is hard to get and the Hague process is too slow for this case.  We need to keep this case moving for RXP holders and business partners.

Lawyer 2: When the SEC filed this suit, many exchanges drops XRP and many hedge funds dropped XRP from their portfolios. Other jurisdictions that have concluded that XRP is not a security are being hit with these requests, and they are "freaked out"

 Lawyer 2: They are trying to destroy our business before we have our day in court. They used the file number from their original investigation, not acknowledging that it's already a case in court. They are no longer in their Article 1 world. It's time for Article 3

Judge Netburn: Does the SEC want to respond now? SEC Lawyer (Inner City Press has covered him before): There are authorized multilateral requests. Section 6A says it creates no rights or obligations. Some have not responded to us. SEC lawyer: It's not akin to compulsory process. The only case on point is "Badian," Judge Pitman said it's like voluntary discovery. Look at Docket 136-2, page 8... It depends on the regulator's discretion. Chief Judge Swain said this doesn't change anything

SEC lawyer: They'll get all the documents at the end. And they can object to admissibility. Lastly, they're able to locate evidence abroad using their impressive business relationship. They are saying, That takes too much time, let's go forward without evidence

SEC lawyer: Defendants have used FOIA, that's not subject to the supervision of the court. The SEC is not a "super-litigator" but is a government agency. They have contractual relations that the FRCP don't get at. So we can do this

SEC lawyer: We want to get it resolved quickly too. Now they tell us it's too fast. It's not inequitable. Thank you.

 Judge Netburn: Why would your request to foreign regulators be privileged? And if so, why not on privilege log? SEC lawyer: We'll put it on a log.

SEC lawyer: Our letters to the regulators state our theory of the case. That's work product. They're not entitled to it. Judge Netburn: They say you've provided categories, not redacted versions of the request. SEC lawyer: We've extracted the request.

 SEC lawyer: We've requested inter-day trades, XRP's status, if they want to call those "categories." Why do they need a copy of the letter? There are sensitivities. Paul Weiss lawyer: The Judge Pitman case, they are incorrect. These requests are not voluntary.

Judge Netburn: What about your use of FOIA, that could be considered compulsory. [Inner City Press aside: That's not how many agencies, including financial regulators like the OCC and Fed, seem to view it.] Paul Weiss lawyer: The government has more power.

Judge Netburn: I'm going to take this under advisement. I'm afraid I'm not going to rule now - I have to look into some things.  Inner City Press will stay on this.

The case is Securities and Exchange Commission v. Ripple Labs Inc. et al., 20-cv-10832 (Torres / Netburn)


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