US Federal Magistrate for the State of New York, Sarah Netburn, has ordered Ripple Slack messages between employees must be handed over to the Securities and Exchange Commission (SEC), handing a win to the regulator in the ongoing legal case against the company for selling unregistered securities.
The XRP Lawsuit was originally filed just prior to Christmas last year, alleging that Ripple Labs and it’s CEO’s knowingly sold the Ripple digital asset as an unregistered security.
As we have previously reported, Ripple Labs has fought back recently against what it believes to be over-reach by the regulator, filing motions to uncover the SEC’s internal rules on employees crypto trading which would expose the XRP holdings of it’s staff.
But this latest turn in the ongoing saga against Ripple Labs and it’s previous and current CEO’s Brad Garlinghouse and Christian Larsen sees the company now facing the prospect of delivering potentially hundreds of thousands of internal messages, despite the company’s protestations that complying with this request would cost them up to $1M. Law360 reported the win against the company on September 2, 2021.
The judge appears to have agreed with the SEC, who last month complained that slack messages which had been produced by the company already were incomplete, but that based on initial findings the messages were “relevant to the parties’ claims and defences and proportional to the needs of the case“. Ripple labs initially denied the claim that it had provided incomplete messages, but later they amended their statement saying that they had only produced a small amount of the relevant messages due to a “data processing error”.
In addition to requiring the Ripple Slack messages be turned over to the SEC, the Judge also ordered the company to deliver all messages from 22 email custodians. Judge Netburn decided that the cost to Ripple in producing the messages was outweighed by their relevance and importance in the ongoing case.
“Any burden to Ripple is outweighed by its previous agreement to produce the relevant Slack messages, the relative resources of the parties, and the amount in controversy,”Judge Sarah Netburn
Ripple Slack Messages likely to show information highly relevant to the XRP Lawsuit
The SEC contends that the failure of the company to provide the entire set of Ripple Slack messages was “highly prejudicial” to the ongoing XRP lawsuit, given that the small trove of messages already received by the regulator showed the remainder would be highly relevant to the case.
“These messages include: (a) discussions about Ripple’s desire to create speculative trading in XRP, (b) the effect of Ripple announcements and efforts on, and Ripple’s concerns as to, the price of XRP, the relationship and central importance of XRP sales to Ripple’s overall business, and (d) the regulatory status of XRP.”SEC Motion to Compel handing over of Ripple Slack messages