Court denies SEC access to Ripple’s legal advice
Ripple has scored another win in its ongoing legal battle against the United States Securities and Exchange Commission as the court has denied the SEC access to Ripple’s legal advice.
Magistrate Judge Sarah Netburn of the District Court for the Southern District of New York ruled Sunday to deny the SEC’s motion to compel Ripple to produce memos discussing XRP sales with the firm’s lawyers.
According to the SEC, Ripple could have been aware that XRP could be a security from its legal advisors before moving forward with its token sale back in 2013. The SEC filed a motion on May 7 to compel Ripple to produce all communications discussing any legal advice Ripple sought or received as to whether its offers and sales of XRP would be subject to federal securities laws.
In the latest ruling, Netburn referred to the attorney-client privilege that is meant to “encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” The judge noted that Ripple has not waived its attorney-client privilege despite defendants being able to waive it in certain circumstances.
The ruling also pays special attention to the rule of fair notice, which requires the courts to construe ambiguous criminal statutes in favor of the defendant. In asserting this defense, Ripple claims that the SEC failed to provide market participants with fair notice that the regulator considered XRP a security.
“In support, it cites to the SEC’s eight-year delay in pursuing enforcement action against Ripple for its alleged securities violations — even after XRP was listed on over 200 cryptocurrency exchanges, billions of dollars of XRP sales transactions had taken place, and Ripple had entered a settlement with the U.S. Department of Justice and FinCEN that described XRP as a ‘convertible virtual currency,’” Netburn wrote.
The judge noted that the SEC may renew its motion application if Ripple “raises its beliefs or relies upon its privileged communications in support of its fair notice defense.”
The latest ruling is yet another milestone in the SEC’s battle against Ripple after the regulator filed a lawsuit against Ripple Labs, CEO Brad Garlinghouse and executive chairman Chris Larsen in December 2020, alleging that XRP was a $1.3-billion unregistered securities offering. Ripple has managed to achieve a series of legal victories, including winning access to internal SEC discussion history regarding cryptocurrencies in April. The court also denied the SEC the ability to disclose the financial records of Garlinghouse and Larsen.
Last week, Garlinghouse confirmed Ripple’s plans to go public after the firm resolves its case with the SEC, stating that the likelihood of this scenario was “very high at some point.”