A federal judge in New York’s Southern District denied Tuesday a defence motion requesting the US Securities & Exchange Commission disclose its employees’ activities trading in digital assets, according to court records.
US Magistrate Judge Sarah Netburn, presiding in the case SEC vs Ripple Labs, Inc. ruled the “Defendants are not entitled to SEC employees’ annual certifications of XRP purchases, sales, and holdings.”
In her ruling, Nerburn added the SEC contends under its ethics guidance, issued 16 Jan. 2018, SEC employees are restricted from trading digital assets on the SEC’s Watch List. XRP was added to the Watch List on 13 April 2018.
The motion, filed by Ripple Labs as Defendants, is part of a larger case brought in Dec. 2020 by the SEC charging Ripple and two Ripple executives specifically with conducting a $1.3bn unregistered securities offering. The SEC alleges Ripple denied “potential purchasers [of XRP] of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”
XRP is Ripple’s digital asset traded over its XRP Ledger blockchain. Ripple, a privately held company, is funded primarily through sales of its XRP Cryptocurrency, and has closed five rounds of venture-capital funding, TechCrunch reported.
A Ripple XRP Liquid Index trades on the Nasdaq Exchange, and closed Tuesday at $0.884, down from the $0.941 opening price.
Ripple had been seeking “either anonymized or aggregated documents reflecting the SEC’s trading preclearance decisions with respect to its employees’ transactions in Bitcoin, Ether, or XRP, and either redacted or aggregated annual certifications concerning SEC employees’ XRP holdings,” the motion states.
The broader case against Ripple Labs concerns Co-founder and former CEO Christian Larsen and current CEO Bradley Garlinghouse allegedly raised $1.3bn “beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide.”
“Ripple also allegedly distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services,” the original charge reads. “The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.”
SEC Enforcement Division deputy director Marc Berger said at the time of the charges, “[h]ere, we allege that Ripple and its executives failed over a period of years to satisfy… core investor protection provisions, and as a result, investors lacked information to which they were entitled.”
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