The U.S. Securities and Exchange Commission (SEC) is trying to get access to internal conversations from Ripple, a blockchain-based payments company.
On Monday, the SEC filed a petition with the Southern District of New York asking that a judge compel Ripple to hand up Slack messages in which Ripple officials talk about their company communication tools. Ripple’s lawyer, James Filan, made the announcement on Twitter.
#XRPCommunity #SECGov v. #Ripple #XRP BREAKING: SEC files emergency motion for a discovery conference regarding Slack communications. Seeks order compelling Ripple to search and produce relevant communications between Ripple employees on Slack.https://t.co/AQ8Av1igoV
— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) August 9, 2021
According to the aforementioned document, the regulator alleges that Ripple had promised to share Slack data with the plaintiffs, but has now retracted that promise in the final days of fact discovery because of the error on Ripple’s part in collecting that data.
A Disagreement Over Slack Messages
After the SEC requested the documentation on July 23, the investigation revealed that while the message about the importance of Slack messages was communicated to the Ripple team, Ripple finally admitted the SEC’s suspicions were correct and Ripple had not gathered nor searched for any Slack communications relating to Ripple CEO Brad Garlinghouse. The report claims the cause is that the collecting procedure contained a mistake.
Ripple said that its Slack communications to the SEC were incomplete because of a “data processing mistake.” The SEC thinks that the search did not gather a “massive quantity” of Slack conversations, and believes that Ripple collected a “small portion” of the messages inside Slack.
The missing messages include over 1 million communications, totaling over “terabytes of data,” that far outnumber Ripple’s massive email output, according to evidence given by SEC officials. In support of the prior assertions, the organization highlighted how Slack messages previously sent by Ripple “have given vitally significant information that was not included in emails or other papers provided by the company.
Later, Ripple asked for more time to reply to the SEC’s motion filed on Thursday about Slack conversations, which was due on Monday, Aug. 16.
The SEC’s Ripple Case
The SEC’s lawsuit against Ripple claims that Ripple began raising money in 2013 by selling digital assets called XRP to investors in the United States and globally without having registered the securities offering with the U.S. Securities and Exchange Commission (SEC). While Ripple claims to have dispersed billions of XRP for non-cash compensation, such as labor and services like market making, this is under investigation.
As a result of the lawsuit, it was further alleged that Larsen and Garlinghouse structured and promoted the $600 million of XRP sales that were used to fund the firm, and, in addition, carried out roughly $600 million in personal unregistered sales of XRP. The suit claims that the defendants violated federal securities laws by failing to register their offers and sales of XRP and/or by failing to follow any of the necessary exemption procedures.