SEC vs. Ripple Labs: SEC granted permission to continue foreign discovery

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The United States Securities Exchange Commission bagged a small win in the lawsuit against Ripple. Ripple Labs CEO Brad Garlinghouse and Chris Larsen had written a joint letter to the presiding judge stating that the SEC’s perusal of foreign regulators for information on Ripple and XRP transactions falls outside the federal rules. The executives argue that SEC is using the Memorandum of Understanding between SEC and foreign regulators improperly. The letter further stated that the involvement of foreign regulators results in intimidation of Ripple Lab’s overseas partners.

However, magistrate Judge Sarah Netburndisagreed and dismissed the motion of the firm to halt the SEC in their discovery process. The judge stated, after review, that the SEC has not been acting in bad faith; hence, there is no evidence or reason compelling enough to stop the SEC. The SEC also has a precedent for pursuing foreign discovery in a civil lawsuit.

The SEC is part of the Organization of Securities Commissions’ MoU for cooperation for information sharing. This allows the SEC to easily obtain information from foreign regulators about Ripple and XRP. The SEC revealed that it has issued 11 requests to nine foreign regulators in this matter.

Magistrate Judge Sarah Netburn has ordered the SEC to obtain all information through formal requests and submit copies of all requests to ensure transparency.

In December 2020, the US Securities and Exchange Commission filed a lawsuit against Ripple Lab alleging that the firm had been selling XRP as an unregistered security. The firm’s cryptocurrency XRP took a hard hit because of the lawsuit. Ever since then, it has recovered to a larger extent – participating in the bull run of 2021. Ripple Labs had also bagged a few minor victories in the lawsuit up till now which has resulted in the firm and the crypto back on track.

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