The US Securities and Exchange Commission (SEC) has asked a federal judge to force Ripple Labs to produce more financial statements, as well as other documents, to help the court decide what penalties to impose in its case against the company.
In a January 11 filing with the US District Court for the Southern District of New York, SEC lawyers asked Judge Sarah Netburn to issue an order requiring Ripple to provide financial statements from 2022 to 2023 and “post-complaint contracts governing” institutional sales. . “”
The information relates to a July 2023 ruling, in which Judge Analisa Torres decided that XRP sales to institutional investors amounted to unregistered, and therefore illegal, securities offerings.
“The SEC requests this limited, targeted discovery to assist Judge Torres in determining whether, having found Ripple liable for violating Section 5 of the Securities Exchange Act of 1933, the court (…) should impose relief such as injunctive relief.” And civil penalties, with respect to the latter, and for any amount,” the file stated.
Ripple also filed a request on January 11, requesting two additional days to respond to the SEC’s proposal, giving the company until January 19 instead of January 17.
The end is near for the Ripple case
The long-running case dates back to December 22, 2020, when the SEC filed a complaint against Ripple Labs and its founders, Christian Larsen and Bradley Garlinghouse, accusing them of selling more than 14.6 billion units of XRP without registering their offers and sales. With the Securities and Exchange Commission; Larsen and Garlinghouse were also charged with aiding and abetting the abuse.
The case reached an important turning point in July 2023, when Judge Torres issued two summary judgment orders seeking to dismiss or confirm the case before trial. Ultimately, Torres ruled that institutional offerings of Torres argued that due to the nature of the sales, buyers were unable to know whether their funds were payments to Ripple or any other seller of XRP.
However, shortly after this double ruling, another judge ruled in the SEC case against Terraform Labs and Do Kwon that Torres misinterpreted securities law, stating that “the Howey test does not discriminate between purchasers” – and thus the securities case Blindly sold on exchanges is still hotly debated.
In August 2023, the SEC indicated that it would seek an interlocutory appeal—that is, before the end of the trial—of the programmatic sales ruling. Both sides were allowed to present their cases for and against the appeal, but on October 3, Judge Torres denied the SEC’s request.
When an interlocutory appeal is denied, the denied party generally cannot appeal the same case again at the end of the full trial, barring a change in legal precedent, new evidence, or procedural error.
This means that the question of whether “programmatic” retail sales of XRP can be considered sales of securities has likely been settled, in this case, and at this court level at least, but the SEC always has the option of appealing to a court. supreme court. Given how important the debate over digital assets and investment contracts is to its regulatory mandate — as well as the more favorable ruling in the Terraform Labs case — it’s likely that the SEC won’t let this case go.
Ultimately, in October 2023, the SEC dropped its case against Larsen and Garlinghouse, meaning the institutional sales — worth $757 million — were all that remained of the case. It is now up to the court to determine what Ripple will ultimately pay in penalties for these illegal securities sales, which is why the regulator is requesting more financial data and documents from the company.
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