coincodex.com
Key takeaways:
- The judge’s decision to allow access to Binance records could be a turning point in the lawsuit between Ripple Labs, Inc. and the SEC
- The SEC has accused the cryptocurrency payment company of unregistered sale of securities to the tune of $1.3 billion
- The court’s recent decision marks another important procedural win for Ripple in the last two weeks
This week, Ripple Labs, Inc. scored an important procedural victory in the lawsuit with the Securities and Exchange Commission (SEC). The judge has granted the payment company access to Binance’s records, which could prove that the Ripple CEO Brad Garinhhouse was acting outside the SEC’s legal authority.
Why is the SEC coming after Ripple Labs?
The SEC has come after the company’s CEO in December 2020 because of the sale of unregistered securities within the regulatory body’s jurisdiction. Ripple is charged for having sold more than 357 million XRP worldwide, raising over $1.3 billion in the process. Additionally, Ripple’s cofounder Cristian Larsen and CEO Bradley Garlinghouse are charged for facilitating a personal unregulated sale of XRP worth $600 million in total.
Per the SEC’s press release, Ripple began raising funds via the unregulated sale of digital tokens in 2013. The capital was used to finance the company's business.
According to court documents, US District Court Judge Sarah Netburn, who is heading the case, has approved the legal defense’s motion to “Obtain international discovery” of Binance business records. The CEO’s legal team hopes that the Binance documents will prove that Garlinghouse and the payment company were acting outside of the SEC jurisdiction.
Since an overwhelming majority of XRP sales took place outside the US, the legal team believes that they should not be subject to US regulations and consequently not within the legal reach of the SEC. There is a clear legislative basis for the defense’s argument. According to the 1933 Securities Act, the legal persecution of illegal securities sales applies only to domestic sales and securities offers.
The multifaceted approach of Ripple's legal team
The defense attorneys have approached the case very deliberately. On one hand, they argue that the sale of securities outside the US shouldn’t be grounds for the SEC lawsuit. On the other hand, they have been trying to show that XRP itself is not a security.
For this reason, they have prompted the court to allow the former director of the SEC’s division of corporation finance, William Hinman to sit for a deposition. Hinman has previously proclaimed Ethereum to be “sufficiently decentralized” and thus not a security in a speech at the Yahoo All Markets Summit.
Ripple is hoping for the same resolution and believes it should be granted the same status as Ethereum. The judge approved the legal team defense’s request and allowed the former SEC official to testify.