Ripple Labs moved to deny the U.S Securities and Exchange Commission (SEC), a federal judge in New York, a motion to record crypto transactions by its employees in an attempt to show that it did not consider XRP a security.
The SEC wins one against Ripple
According to an official transcript Ripple requested the information on August 27. The reason for the request was to show that if the SEC employees traded XRP, that would at least expose the SEC’s past inaccuracies about the nature of XRP. It would also prove that the SEC didn’t consider XRP a security.
Defendants claim that trading decisions by individuals will expose the uncertainty about XRP’s status as well as whether the SEC considered XRP a security. This evidence would bolster the fair notice defense of the Defendants and undermine the SEC’s claims that Individual Defendants acted recklessly. Defendants claim they have the right to find out whether employees were allowed to buy, sell, or hold XRP during the relevant time period.
Judge Sarah Netburn, however, disagrees with Ripple because of several reasons.
First, she supports the SEC’s argument “the preclearance process does not involve any determination made by SEC ethics counsel that a trade is compliant with the securities laws.” In other words, the SEC Ethics Counsel did not propose any provision specifically relevant to XRP and so the trading history for SEC employees is irrelevant in this case.
Another argument in favor of Ripple’s denial was the absence of legal justification for approving Ripple’s demands. As U.S citizens, the federal rule protects SEC employees’ privacy rights.
In order to protect the privacy of government employees, Congress has presumptively banned disclosure of financial information through federal privacy laws and regulations.
Ripple attempted to use a similar argument before. Slack was used by the SEC to access Ripple’s internal communications. Cryptopotato reported that Ripple claimed producing such documents would be a lengthy and expensive process. The Court ruled in favor of the SEC, but this was not enough.
The court also explains that the SEC did not have a trading policy for digital assets during the time of the lawsuit. Therefore, its employees were not in violation of the rule, even if they traded cryptocurrencies.
XRP (Relatively), Unfazed
XRP didn’t react too strongly to the disappointing news. XRP generally follows the Ripple SEC developments. There are rallies when Ripple wins and crashes when San Francisco-based Ripple suffers setbacks, like today.
Price of XRP Image by Tradingview
XRP currently trades at $0.878, down about 5.5% over the last 24hrs and recovering slightly about 0.5% today.
This seems more a natural response to the market state than Ripple’s. After the Evergrande scandal, Bitcoin, the SP500 and many global markets are experiencing a period in nervousness.
Marla Brooks – Financial Analysis
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