XRP Lawsuit: US SEC May Win Against Ripple In XRP Sales Discovery Requests

The U.S. Securities and Exchange Commission (SEC) filed a response to defendant Ripple’s opposition to providing audited financial statements for two years, post-complaint contracts for the sale or transfer of XRP to “non-employee counterparties”, and details on the amount of “XRP Institutional Sales proceeds” received after the lawsuit.

US SEC’s Reply To Ripple’s Opposition

According to a court filing late January 23, the U.S. Securities and Exchange Commission submitted a reply to further support its motion to compel. Plaintiff SEC argues its remedies-related discovery requests are procedurally proper, not “untimely.” Also, it argues that courts largely consider post-complaint facts through remedies for securities law violations.

Furthermore, the SEC is seeking penalties from Ripple and “send as strong a message” that securities violations will be taken seriously. It is not seeking a mini-trial or any determination on the legality of post-complaint sales to institutions, including ODL customers. It asserts it does not need to do so to obtain an injunction they could stop those sales from continuing.

Ripple can argue that it intends to structure future ODL sales so they do not fall within the scope of the summary judgment institutional sales category. However, the SEC says it should have the post-sale and post-summary decision contracts to test Ripple’s intention and if it is commercially viable for Ripple to structure ODL sales in a compliant way.

Pro-XRP attorney Bill Morgan said, “It may not lead to a mini-trial but there is a lot at stake with this issue. A wide injunction could do a little of harm to Ripple’s ODL business. I think there will be discovery ordered of these post-complaint contracts.”

Read More: Ripple Fires Back At SEC For Seeking Financial Statements And Discovery

SEC Submits Declaration by Carolyn Dicharry

Ripple claimed that the SEC failed to request discovery while fact discovery was open and now lacks good cause for further discovery concerning post-complaint sales. Moreover, the SEC has used all of its interrogatories in the case.

In response, the SEC submits a declaration by Carolyn Dicharry, a Ripple’s consultant from 2015 to 2019. She testified that Ripple through XRP II LLC entered into XRP direct sales contracts with 23 specific counterparties, as per Ripple’s business records between July 2017 and April 2020.

She also claimed that most XRP sales between May 2020 and June 2023 were ODL transactions, sourcing XRP directly from Ripple. “Ripple also sold some XRP on centralized digital asset exchanges via market-makers to unknown purchasers.

Also Read: BitMEX CEO Says Will Do Bitcoin (BTC) Bottom Fishing Below $35,000