While Ripple executives Brad Garlinghouse and Chris Larsen filed motions to dismiss the Securities & Exchange Commission (SEC) case, there is still a month before it would be decided.
SEC attempted to gain an unfair advantage
The agency has been sending formal government requests to other foreign regulators to get documents from companies in respective countries that work with Ripple and subsequently forward them to the SEC.
Ripple found out about the requests directly from one of the companies and moved to stop the SEC from sending the requests since it is outside the Rules of Federal Procedure. The main issue discussed in the discovery hearing is whether the memorandum of understanding (MoU) between the federal government and foreign governments is mandatory or voluntary.
Jorge Tenreiro, the senior trial attorney at the SEC, stated that the MoU process was not compulsory. However, the flow of securities and money does not stop at a country’s borders. The agency added that it does not intend to disclose the content of the MoU requested since this information is privileged.
Ripple responded that the SEC was attempting to “gain an unfair advantage” and that the requests do not sound “voluntary” at all. The company argued that the MoU process is compulsory and asserted that the agency is leveraging the “weight and power of the US government.”
Judge Sarah Netburn told Ripple:
My understanding is that although the foreign company must comply with the request by its government, the foreign government does not have to comply with the SEC’s request.
Attorney Jeremy Hogan commented that the reason for this ruling is because the Judge believes it would provide the litigating parties equal power. The Ripple attorney responded that there is a basis for not providing the documents since the requests are not voluntary, primarily when smaller countries deal with a large economy like the United States.
Judge to review case precedent before ruling
The legal battle sits on case precedent SEC v. Badian, where Judge Robert Pitman ruled that the regulator could use these types of MoU requests. SEC attorney Jorge Tenreiro also represented the financial watchdog in the Badian case and described the ruling:
Thus in SEC v. Badian, Magistrate Judge Pitman considered and rejected defendant’s request that in an enforcement action, the federal rules require that the SEC be Ordered to cease using Requests for use in litigation.
The cross-border remittance firm distinguished itself from the Badian case, stating that the defense attorney made a mistake by telling the judge that foreign governments were voluntary – which was false. Since the case was ruled based on incorrect facts, Ripple argued that the judge should not look to the case for persuasive authority on the XRP lawsuit.
At the end of the hearing, the Judge did not provide a ruling immediately. Attorney Hogan believes that Judge Netburn would like to take a look at the Badian file again to see if Ripple is distinguishable from the case. After considering the factors of the case, the Judge will announce her verdict in the coming days.
Original Source : fxstreet.com
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