Did Ripple know that XRP is “different” from Bitcoin? SEC to unseal alleged evidence

  • The SEC cites three pieces of evidence to prove that Ripple was aware of XRP’s differences from Bitcoin and Ethereum.
  • Keeping the documents under seal, as Ripple requested, is “troubling” and problematic, according to the SEC.

Jorge Tenreiro, a senior trial attorney at the U.S. Securities and Exchange Commission (SEC) may have hit Ripple on a sore spot during the discovery phase currently underway. In a letter to Magistrate Judge Sarah Netburn, Tenreiro claims that “Ripple continues to hide critical facts relevant to this case from its investors.” This is “troubling” and underscores the need for disclosure requirements to protect investors, he claims.

As reported, Ripple executives Chris Larsen and Bradley Garlinghouse had denied an SEC request on March 11 to produce certain personal financial information. However, the regulator stressed in a response that the financial records could be relevant to “proving the Individual Defendants’ sanity and their efforts to increase the value of XRP.”

In support of these claims, the SEC has now disclosed emails and communications that Ripple may have preferred to keep hidden. Among other things, the SEC has produced an email between Larsen and a third party in which he “expressed his understanding of the legal risks he took with respect to XRP”. A second piece of evidence relates to Larsen’s funding of a company called MTQ Exs. A&B, “which sold hundreds of millions of XRP to the public.”

The SEC thus counters a central argument of Ripple’s lawyers that “the economic substance of a transaction in XRP is no different from one in Bitcoin or Ether.” To support this argument, the SEC cited two internal Ripple communications purporting to show that Ripple was aware of XRP’s disparity with Bitcoin and Ethereum:

Evidence developed by the SEC shows that Ripple transmitted to third parties at least some version of the legal memo at issue (MTC Ex. A) on at least 18 separate occasions, and that, indeed, it also shared with third parties the content of additional conversations (not reflected in the memo itself) it had with counsel about the subject matter of this memo.

In addition, the SEC presents a purported third piece of evidence that a “separate sophisticated participant in the digital asset marketplace that invested in Ripple understood that XRP was unlike bitcoin because of the fundamental economic difference between an asset (XRP) offered and sold by one central entity, and one not so offered (like Bitcoin).”

In his letter, Tenreiro argues that the public has a right to see this evidence and therefore opposes sealing. Whether the alleged evidence will get Ripple in trouble or not, and their response, remains to be seen.

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