SEC got Caught abusing its Government Powers


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The SEC got caught going behind everybody’s back abusing its position to obtain documents from foreign companies who are compelled to comply.

Every SEC vs. XRP hearing has been anything but boring. It is like a wrestling match between two heavyweight wrestlers trying to outmaneuver each other. So far, Ripple has played their cards right and has maintained an edge over the SEC. 

With the SEC being cornered by the brilliant defense of Ripple’s lawyers, it is now playing downright ugly. The recent hearing is a testimony that one cannot even rely on government organizations to be fair. Before we get down to the topic, let us be up-to-date on what has happened so far in the case. 

Ripple’s Chris Larsen and Brad Garlinghouse have filed a Motion to Dismiss/Strike to get the case against them dismissed. The decision on their motion to dismiss/strike is pending, and it will take almost a month for the court to decide on it. On the other hand, the SEC has also filed a motion to strike Ripple’s fair notice defense, which will also take a month or so for a judgment from the court. 

Discovery Battle – SEC vs. Ripple 

The recent hearing on SEC’s lawsuit against Ripple is a part of the discovery process. What stood apart in this hearing was that the SEC has been abusing its governmental position and sending letters to other foreign regulators. 

The SEC has requested foreign regulators to visit the companies in their jurisdiction that are working with Ripple and get all XRP-related documents from them. Once collected, the SEC has asked the foreign regulators to forward the documents to the SEC. Noone expected the SEC to abuse its powers in such a blatant manner. It becomes even worse, considering that the SEC never informed Ripple about sending a letter to foreign regulators. 

Are you wondering how did the news about it become public then? Ripple was tipped off by one of Ripple’s partner companies after being asked to share documents related to Ripple by their country’s foreign regulator. Thus, Ripple moved to court to prevent the SEC from doing so.

Is it Legally Correct?

Lawyers are free to get in touch with anyone related to the counterparty and ask for any information they deem important for the case. The person they are calling or trying to get in touch with has all the right to neglect to share any information. 

The lawyer cannot get in touch with any third party if they are legally obligated to speak with a lawyer. To obtain the information from legally obligated organizations or individuals, the lawyer will have to follow the rules of civil procedure. In this case, the lawyer will have to subpoena them, which the third party can object to. It is the exact topic that was being discussed in the current SEC vs. Ripple hearing. 

The question was if the memorandum of understanding between the US Federal Government and the SEC with foreign governments and their regulators is voluntary or mandatory. If it is mandatory, the SEC has grossly abused its powers as they aren’t legally authorized to reach out to foreign regulators for such requests. In case it is voluntary, the SEC is legally correct in reaching out to the foreign regulators. 

Judge Netburn’s Comments 

During the hearing, Judge Netburn’s first comment was to Ripple’s lawyers. She said:

“My understanding is that although the foreign companies must comply with the request from its government. But the foreign government does not have to comply with the SEC’s request.” 

It is obvious from Judge Netburn’s statement that she thinks that the SEC has done no wrong in reaching out to foreign regulators. Ripple’s lawyers sensed it well and presented a strong statement. He said that in most parts, such a request from the SEC isn’t voluntary. Especially, if it involves a smaller country as they cannot say no to an economic giant like the United States. 

Ripple at Backfoot

A bad case precedent can prove to be a game spoiler, and the Ripple defense team must already be knowing about it. The SEC vs Badian case was fought in the same court, and Judge Pitman ruled that SEC could use such requests in any cases involving them. On top of that, Jorge Tenreiro, the attorney representing the SEC against Badian, is also representing the SEC against Ripple. 

After the hearing, Judge Netburn did not deliver a judgment right away. She must have pulled the SEC vs. Badian case file to see if Ripple’s case was different than the SEC vs. Badian case. 

Summary of Latest SEC vs. Ripple Case Hearing 

It would be interesting to know if Judge Netburn allows SEC requests for XRP-related documents from foreign companies via their country’s regulators. In this case, the SEC did have an upper hand, but we have to appreciate Ripple’s lawyers that got Judge Netburn to think and deliberate before delivering the judgment. 

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