Ripple’s nearly 30,000 questions could break the SEC’s n.1 case

“It blows my mind that the SEC has not reviewed already, and is arguing that it’s “unduly burdensome” that it actually review the contracts it is suing about!”, attorney Jeremy Hogan commented.

The SEC has responded to Ripple’s opposition to the SEC’s request for a protective order against the nearly 30,000 requests for admission (RFA).

The original SEC filing, which we covered as “Ripple buries SEC in paperwork“, argues that the RFAs impose an extreme, disproportionate, and unnecessary burden on the agency and that the courts routinely disallow much less burdensome and excessive requests on the grounds that they are “abusive, unreasonable, and oppressive”.

The SEC also informed the Court that it spent more than 100 hours responding to 254 requests. At that rate, the Plaintiff would need over 473 days to complete the task.

In its response, which we covered as “Ripple calls negligence as SEC seeks $1.38 billion from XRP lawsuit“, the blockchain firm insisted that the RFAs concern critical facts that defendants believe are not genuinely disputed and that the SEC does not argue they are irrelevant, instead they complain about being “unduly burdensome”.

Ripple then explained why it is triply wrong:

  • The large number of RFAs does not merit a protective order in itself;
  • The RFAs only require the SEC to respond to a portion;
  • The quantity of RFAs are driven by the SEC’s own litigation theories, particularly that the sales of XRP were part of an investment contract

The SEC has responded to Ripple’s arguments by stating they are misleading in several respects:

First, the fact that a case is complex, significant or well-publicized does not permit a party to burden its opponent with a
crushing number of RFAs that is “abusive, unreasonable, and oppressive.”

Second, many of the RFAs are disputed, irrelevant or otherwise objectionable, and therefore are unlikely to result in useful admissions.

Third, Defendants recently served the SEC with expert reports that address the same issues as their Fifth and Sixth Set of RFAs, rendering those RFAs cumulative and duplicative.

Attorney Jeremy Hogan, who has been commenting on the SEC v. Ripple lawsuit since the beginning, has expressed sympathy toward the SEC.

“As to whether the SEC must respond to Ripple’s 29k Requests for Admissions I am on the SEC’s side to a large extent”, he said, adding that “it blows my mind” that the agency is calling “unduly burdensome” a task that makes them reviewing the contracts it is suing about.

That is exactly what Ripple argued in its response, calling the SEC negligent.

“That contention puts centrally at issue the express terms of more than 1,700 separate contracts. Yet the SEC now complains that it would be unduly burdensome to “require the SEC to review” the contracts it alleges are unlawful securities offerings. This is a remarkable admission; apparently, the SEC failed to review these contracts before alleging in its complaint that every single one of them was part of a course of unlawful conduct. Indeed, the SEC seeks disgorgement of “at least” $1.38 billion in revenue generated by Ripple from those exact same contracts, yet says it can’t be bothered to actually read them.

“Despite multiple invitations to do so, the SEC has not yet identified a single contractual provision that supports its claim that these are “investment contracts” under the Howey test, yet it has reserved the right to rely on such contracts in support of its claims.”

The RFAs require the SEC to clarify their understanding of the XRP sales contracts, which the agency calls securities. Since this claim is their n.1 argument against Ripple in the lawsuit, the SEC is likely to do everything in its power to refrain from answering those questions, otherwise, it risks weakening its only chance for a win.

Asking for a protective order so late in the fact discovery period might work in favor of the SEC, however. The Judge may feel pressured to resume the lawsuit rather than rescheduling deadlines.