“Ripple is ORDERED to conduct a reasonable search of the relevant video and audio-taped recordings and produce responsive documents.”
After a week of silence, Judge Netburn has ordered Ripple to search for and turn over video and audio recordings of the firm’s internal meetings.
The SEC’s motion to compel was granted as expected after an extensive back and forth between both parties.
Ripple argued that the plaintiff’s “boil-the-ocean demand” was “flatly incompatible with the federal rules” as well as the SEC’s claim that the recordings will prove XRP was sold as securities is “sheer conjecture”.
The SEC said that Ripple’s conduct necessitated this motion: “Ripple failed to search its library of recordings—or even inform the SEC that it was withholding responsive recordings—until its former Chief Compliance Officer testified in the last month of fact discovery that Ripple maintained such recordings.
Attorney Jeremy Hogan, who has been commenting on the SEC v. Ripple lawsuit right from the start, said last month that the recordings dispute was “not looking good for Ripple” and that they will form the backbone of the SEC case and that is why that whether it is able to gain access to more recordings is very important to the lawsuit.
He also predicted that the Judge would rule in favor of the SEC’s motion with limitations and he was right. The order is transcribed below:
“Ripple’s search of its recorded meetings has been inadequate under the circumstances. While the Court recognizes that a human review of the recordings may be unreasonable, a reasonable search could include automated transcriptions of recordings (similar to the common technology used to transcribe voicemail messages) and the use of search terms.
“Accordingly, Ripple is ORDERED to conduct a reasonable search of the relevant video and audio-taped recordings and produce responsive documents. Because Ripple represents that it has more than 4,000 recordings, the parties are ORDERED to meet and confer to determine whether there are particular time periods when recordings are most likely to be responsive to the SEC’s discovery demands.
“For example, meetings in the weeks preceding dates of significance may generate more probative material than meetings held at other times. Similarly, cross-references with the calendars for the Individual Defendants or other key employees may identify meetings of significance.
“In light of the close of discovery, Ripple is order[ed] to undertake such efforts without delay.”
This can be considered a major win for the SEC as the evidence found in Ripple’s recordings is likely to beef up the agency’s case that the defendants sold and marketed XRP as an investment contract. This is the plaintiff’s main argument against Ripple.
On the other side, Ripple’s main argument in its favor is that the SEC failed to provide fair notice that the sale of XRP could be construed as an investment contract.
The lack of fair notice is something the whole crypto ecosystem has been complaining about for years as the regulatory framework for digital assets remains unclear and the SEC has been only regulating by enforcement or via “personal opinions” from its officials.
Attorney Jeremy Hogan commented on the ruling: “Remember, an Order like this might give the SEC some bullets for its gun (and vice versa when Ripple wins), but the next BIG Order is on the SEC’s motion to strike the Fair Notice Defense. THAT is the bazooka!”