Securities and Exchange Commission v. Ripple Labs Inc. et al.

Filing 163

ORDER granting in part #126 Letter Motion for Discovery. Having reviewed the parties' submissions, the Court makes the following clarifications: (1)The SEC must produce communications with third-parties, including external agencies and market participants, subject to a privilege assertion. (2)The SEC need not produce informal intra-agency communications, such as emails, and such communications need not be searched or logged. (3)Intra-agency memoranda or formal position papers discussing Bitcoin, Ethereum, and XRP must be searched for and produced subject to a privilege assertion. Examples of such documents include Division reports, final reports of internal working groups, or formal position papers submitted to the Commissioners. Although such documents may ultimately be privileged, information that would be provided on a privilege log, such as dates and participants, may itself be relevant and is discoverable. (4)Any documents withheld on the basis of privilege must be identified on a privilege log. (5)The Court directs the parties to continue to meet-and-confer on the remaining issues presented in their letters. Respectfully, the Clerk of Court is directed to GRANT in PART the motion at ECF No. 126. (Signed by Magistrate Judge Sarah Netburn on 5/6/2021) (ras) Modified on 5/6/2021 (ras).

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M a y 6, 2021
May 6, 2 0 2 1

VI A E C F
H o n. S ar a h N et b ur n
U nit e d St at es M a gistr at e J u d g e
S o ut h er n Distri ct of N e w Y or k
4 0 F ol e y S q u ar e, C o urtr o o m 2 1 9
N e w Y or k, N. Y. 1 0 0 0 7
R e:

A pril 2 1, 2 0 2 1

S E C v. Ri p pl e L a bs, I n c. et al., N o. 2 0 Ci v. 1 0 8 3 2 ( A T) ( S N) ( S. D. N. Y.)

D e ar J u d g e N et b ur n:
Pl ai ntiff S e c uriti es a n d E x c h a n g e C o m missi o n ( “ S E C ”) r es p e ctf ull y s e e ks a n or d er t h at r es ol v es p e n di n g
dis c o v er y dis p ut es a n d b ar s D ef e n d a nts fr o m s e e ki n g irr el e v a nt, pri vil e g e d S E C st aff m at eri als t h at t his
C o urt alr e a d y r ul e d ar e n ot dis c o v er a bl e . T h e S E C is i n t h e pr o c ess of c o m pl yi n g wit h t h e C o urt’s A pril
6, 2 0 2 1 Or d er , E x. 1 (t h e “ Or d er ”) a n d h as b e g u n r e vi e wi n g t e ns of t h o us a n ds of e xt er n al e m ails fr o m
t h e i d e ntifi e d c ust o di a ns f or pr o d u cti o n p urs u a nt t o t h e Or d er. H o w e v er, it h as b e c o m e e vi d e nt t hr o u g h
t he m e et -a n d -c o nf er pr o c ess t h at D ef e n d a nts ar e s e e ki n g t o i g n or e t h e li mit ati o ns of t his C o urt’s O r d er
a n d t o mir e t h e S E C i n i n d efi nit e dis c o v er y dis p ut es a n d, if s u c c essf ul, d o c u m e nt r e vi e w. T h e S E C
s e e ks t o pr o hi bit D ef e n d a nts fr o m : ( 1) o bt ai ni n g i nt er n al S E C st aff c o m m u ni c ati o ns t h e C o urt alr e a d y
e x cl u d e d fr o m pr o d u cti o n , ( 2) s e ar c hi n g S E C st aff p ers o n al d e vi c es, a n d ( 3) a d di n g c ust o di a ns. S e e E x.
2 ( Pr o p os e d Dis c o v er y Or d er).
I.

T h e Or d e r D e ni e d D ef e n d a nts A c c ess t o I nt e r n al S E C St aff C o m m u ni c ati o ns.

T h e Or d er r e q uir e d t h e S E C t o s e ar c h t h e e xt er n al e m ails of 1 9 c ust o di a ns f or d o c u m e nts r el at e d t o
X R P, Bit c oi n, a n d e t h er, b ut d e ni e d D ef e n d a nts’ r e q u ests f or i nt er n al S E C c o m m u ni c ati o ns as n ot
r el e v a nt t o “h o w t h e m ar k et is c o nsi d eri n g X R P a n d h o w t h e i n di vi d u al d ef e n d a nts, h o w it aff e cts t h eir
r e as o n a bl e b eli ef,” a n d gi v e n “t h e p ot e nti al t o s eri o usl y c hill g o v er n m e nt d eli b er ati o ns. ” E x. 1 at 5 2: 1 42 5. T h e C o urt f urt h er i n di c at e d a l a c k of f a mili arit y wit h h o w t h e S E C o p er at es a n d r e q uir e d t h e p arti es
t o m e et a n d c o nf er a b o ut “ w h et h er ” t h e S E C s h o ul d pr o d u c e or e nt er o nt o a pri vil e g e l o g m e m os or
ot h er offi ci al d o c u m e nts “ e x pr essi n g t h e a g e n c y’s i nt er pr et ati o n or vi e ws ” as t o X R P, Bit c oi n a n d et h er.
I d. at 5 3: 2 - 1 3 ( e m p h asis a d d e d). As d et ail e d b el o w, t h e S E C e x pr ess es its i nt er pr et ati o ns a n d vi e ws i n a
n u m b er of w a ys, all of w hi c h ar e p u bli c. T h es e a g e n c y i nt er pr et ati o ns a n d vi e ws ar e s u bj e ct t o t h e
Or d er, b ut i nt er n al e m ails a n d m e m os e x pr essi n g S E C st aff i nt er pr et ati o ns a n d vi e ws ar e n ot.
II.

D ef e n d a nts M a k e N e w a n d B r o a d e r R e q u ests I n c o nsist e nt Wit h t h e C o u rt’s O r d e r.

R at h e r t h a n m e et a n d c o nf er a b o ut w h et h er t h e S E C s h o ul d r e vi e w a n d pr o d u c e or l o g c ert ai n i nt er n al
d o c u m e nts r efl e cti n g a g e n c y vi e ws, D ef e n d a nts wr ot e t h e S E C wit h a l a u n dr y list of d o c u m e nts t h e y
vi e w as “ c a pt ur e[ d] ” b y t h e Or d er, i n cl u di n g t h e v er y s a m e i nt er n al e m ails t h at t h e C o urt or d er e d t h e
S E C di d n ot h a v e t o r e vi e w a n d pr o d u c e — a n d n ot j ust wit h r es p e ct t o Bit c oi n, et h er, or X R P, b ut wit h

Case 1:20-cv-10832-AT-SN Document 163 Filed 05/06/21 Page 2 of 6

r es p e ct to “ cr y pt o c urr e n c y ” g e n er all y, a n d as ki n g f or th e in cl usi o n of a 2 0t h c ust o di a n t h at w as n ot
s u bj e ct t o t he Or d er or t h e p arti es’ pri or dis c ussi ons. S e e E x. 3 ( A pr. 8, 2 0 2 1 L ett er) a t 2 ( n otin g t h at t h e
O r d er “ c a pt ur es all d o cu m e nts – i n cl u di n g pr es e nt ati o n sli d e d e c ks, a g e n d as, a n d ot h er m at eri als – t h at
ar e i nt er n al to th e S E C or th at ma y ha v e b e e n cir c ul at e d as p art of int er - a g e n c y w or ki n g gr o u ps w it h
r es p e ct to cr y pt o c urr e n c y ”). T his re q u est g o e s b e y o n d t h e “d o c u m e nt s ex pr essi n g th e a g e n c y’s
i nt er pr et ati o n or vi e ws ” e n visi o n e d b y t h e C o urt’s O r d er a n d is d e si g n e d t o c a pt ur e pr eli mi n ar y
dis c ussi o ns b y i nt er n al w or ki n g gr o u ps. C o u ns el m et a n d c o nf err e d o n A pril 1 4, 2 0 2 1, a n d D ef e n d a nts
m a d e c l e ar th at if th e S E C di d n ot pr o d u c e or lo g i nt er n al S E C st aff d o cu m e nts , t h e y w o ul d s e ek a n
a d diti o n al O r d er fr o m th e C o urt, s h o wi n g t h at — as furt h er s et f ort h b el o w— D ef e n d a nts a r e i g n ori n g t his
C o urt’s Or d er “ to d e n y i n p art t h e re q u est for di s c o v er y t h at is int er n al , a n d s p e cifi c all y i nt er n al, f or
inst a n c e e -m ail c o m m u ni c ati o ns b et w e e n wh at I will c a ll t h e S E C st aff t o SE C st aff.” E x. 1 at 5 2: 1 4- 1 7.
F urt h er, at a l at er m e et a n d c o nf er o n A pril 1 6, 2 0 2 1, c o u ns el as k e d th at th e S E C s e arc h th e p ers o n al
d e vi c es a n d e mail a c c o u nt s of th e 1 9 S E C c ust o di a ns, alt h o u g h f e d er al la w re q uir es offi ci als usi n g
p ers o n al d e vi c es t o c o p y c o m m u ni c ati o ns o nt o of fi ci al a g e n c y a c c o u nts. S e e 4 4 U. S. C. § 2 9 1 1( a). T h e
I n di vi d u al D ef e n d a nts thr e at e n e d t o wit h h ol d t h eir o w n d o c u m e nts sh o ul d t h e S E C ref us e. 1 If n ot
c o nstr ai n e d n o w , Def e n d a nts h a v e sh o w n t h at th e y will c o nti n u e to i g n or e th e C o urt’s ruli n gs a n d
d e m a n d m or e e n dl ess, b ur d e ns o m e , a n d u n n e c ess ar y dis c o v er y.
III.

T h e r e Is N o Re as o n to Br o a d e n th e C o u rt’s O r d e r.

D ef e n d a nts r e p e at e d j ustifi c ati o n f or su c h f ar- r a n gi n g dis c o v er y i nto t h e SE C’s i nter n al d eli b er ati o ns is
th at we s u e d in di vi d u al s i n thi s c as e. Un d er D ef e n d a nts’ v i e w of di s c o v er y, a n y ti m e t h e S E C br i n gs a
c as e i n w hi c h a d e f e n d a nt’s m e nt al st at e is a t iss u e, t h at d ef e n d a nt w o ul d b e e nt itl ed t o br o a d dis c o v er y
int o t h e int er n al vi e ws of th e a g e n c y’s e m pl o y e es. As this C o urt re c o g ni z e d, t h at v i e w w o ul d c hill
f e d er al a g en ci es’ deli b er ati v e pr o c ess es b y for ci n g th e m to “ o p er at e in a fis h b o wl, ” U. S. Fis h a n d
Wil dlif e S er v. v. Sierr a Cl u b, I n c ., 1 4 1 S. Ct. 7 7 7, 7 8 5 ( 2 0 2 1) (cit ati o n o mitt e d); s e e als o Ex. 1 at 5 2: 1 45 3: 1 9. I n d e e d, pr ot e cti n g d eli b er ati v e pr o c ess is ess e nti al t o a v oi d c hilli n g g o v er n m e nt d e li b er ati o ns:
“[t] h e pr i vil e g e is ro ot e d in ‘t h e o b vi o us re ali z ati o n t h at of fi ci als w ill n o t c o m m u ni c at e c a n di dl y a m o n g
t h e ms el v es if e a c h re m ar k is a p ot e nti al it e m of dis c o v er y a n d fro nt p ag e n e ws.’ ” U. S. Fis h a n d Wil dlif e
S er v. , 1 4 1 S. Ct. at 7 8 5 .
T h at tw o i n di vi d u als w er e c h ar g e d wit h s ci e nt er- b as e d viol ati o ns d o es n ot c h a n g e t hi s a n al ysis. First ,
t h ere is n ot hi n g i m pr o p er or n o v e l a b o ut sui n g i n di vi d u als f or viol ati n g Se cti o n 5 of t he Se c uriti es A ct
of 1 9 3 3. T h e S E C h a s br o u g ht a cti o ns a g ai nst o v er 1 0 0 i n di vi d u als i n t h e di git al a ss et sp a c e si n c e 2 0 1 4,
i n cl u di n g f or vi ol ati n g S e cti o n 5 a g ai nst o v e r 5 0 of th e m. E. g. , S E C v . R E c oi n Gr o u p, I n c., N o. 1 7 Ci v.
5 7 2 5 ( E. D. N. Y. S e pt. 2 9, 2 0 1 7); S E C v . Pl e x C or ps, N o. 1 7 Ci v. 7 0 0 7 ( E. D. N. Y. D e c. 1, 2 0 1 7). I n d e e d,
“ [ h] ol di n g i n di vi d u als li a bl e for w r o n g d oi n g is a c or e pi ll ar o f a n y str o n g e nf or c e m e nt pr o gr a m . . . t o
h a v e a str o n g d et err e nt eff e ct o n m ar k et p arti ci p a nts, it is abs ol ut el y criti c al t h at r es p o nsi bl e i n di vi d u als
b e c h ar g e d a n d t h at w e p ur s u e th e e vi d e n c e as hi g h as it c a n ta k e us. ” M ar y J o W hit e, A N e w M o d el for
S E C E nf or c e m e nt: P r o d u ci n g B ol d a n d U nr el e nti n g R es ults ( N o v. 1 8, 2 0 1 6) a v ail a bl e at
htt ps:// w w w.s e c. g o v/ n e ws/s p e e c h/ c h air- w hit e -s p e e c h- n e w- y or k-u ni v ersit y- 1 1 1 8 1 6. ht ml. T h us, “ o v er
E arli er i n dis c o v er y , Ri p pl e i n di c at e d t o t h e S E C t h at t h e I n di vi d u al D ef e n d a nts a n d ot h er Ri p pl e e m pl o y e es— u nli k e S E C
e m pl o y e es — ar e n ot gi v e n offi ci al w or k p h o n es or c o m p ut ers, b u t r ef us e d t o r e q u est t h at t h e I n di vi d u al D ef e n d a nts c o n d u ct
s e ar c h es of t h os e d e vi c es f or d o c u m e nts r es p o nsi v e t o t h e S E C’s d o c u m e nt r e q u ests t o Ri p pl e.

1

2

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8 0 % of th e S E C’s e nf or c e m e nt a cti o ns . . . i n v ol v e d c h ar g es a g ai nst in di vi d u als ” in c ert ai n y e ars of
C h air W hit e’s t en ur e as t h e l e a d er of th e S E C, A CI’s 3 2 n d F C P A Co nf er e n c e K e y n ot e Ad dr ess , A n dr e w
C er es n e y, Dir e ct or, Di visi o n of E nf or c e m e nt (N o v. 1 7, 2 0 1 5), as w ell a s a b o ut 7 3 % of su c h a cti o ns in
c ert ai n y ears of Ch air C l a yt o n’s t e n ur e. S e e SE C D i visi o n of E nf or c e m e nt A n n u al R e p ort – A L o o k
B a c k at Fis c al Ye ar 2 0 17 ( N o v. 1 5, 2 0 1 7) a t 1 1.
Affir mi n g t h e Or d er’s r uli n g t h at i nt er n al st aff vi e ws o n Bit c oi n, et h er, a n d X R P ar e n ot r el e v a nt w o ul d
n ot r es ult i n t h e C o urt d e ci di n g t h e m erits of t h e dis p ut e, t h e c o n c er n w hi c h D ef e n d a nts’ a d v a n c e d as t o
e xt er n al d o c u m e nts. A n y i nt er n al vi e ws or c o m m u ni c ati o ns of S E C st aff di d n ot c o nstit ut e t h e a g e n c y’s
vi e ws or i nt er pr et ati o ns, w er e n ot k n o w n t o D ef e n d a nts, a n d c o ul d n ot h a v e i nf or m e d w h et h er a n y b eli ef
t h e y h a d a b o ut t h e st at us of X R P w as r e as o n a ble. T h e S E C’s vi e ws a n d i nt er pr et ati o ns a b o ut di git al
ass ets w er e e x pr ess e d i n p u bli c S E C g ui d a n c e, S E C fil e d a cti o ns, a n d t h e ot h er p u bli c s o ur c es d es cri b e d
b el o w. If D ef e n d a nts wis h t o ar g u e t h at t h er e w as i n a d e q u at e S E C g ui d a n c e, t h at ar g u m e nt m a y b e
m a d e b as e d o n t h e p u bli c st at e m e nts of t h e S E C , or l a c k t h er e of. I n ot h er w or ds, D ef e n d a nts ar e a bl e t o
ass ert all t h eir d ef e ns es, i n cl u di n g t h at X R P is li k e Bit c oi n or et h er f or p ur p os es of H o w e y , b as e d o n
p u bli cl y a v ail a bl e f a cts k n o w n t o all p arti es.
B y c o ntr ast, if t h e C o urt r ul es t h at i nt er n al st aff vi e ws or i ntr a - a g e n c y c o m m u ni c ati o ns a b o ut Bit c oi n
a n d et h er ar e r el e v a nt t o X R P, it will eff e cti v el y b e d e ci di n g t h e H o w e y iss u e a g ai nst t h e S E C o n t h e
m erits, b y r uli n g t h at t h e S E C’s i nt er n al vi e ws as t o all di git al ass ets ( or, p ot e nti all y, all “i n v est m e nt
c o ntr a cts ”) ar e r el e v a nt t o t h e a n al ysis, a pri n ci p al t h at w o ul d mir e all f e d er al liti g ati o n i n e n dl ess
dis c o v er y a b o ut i nt er n al d o c u m e nts e a c h t i m e it br o u g ht a ci vil e nf or c e m e nt a g ai n ( or e v e n a cri mi n al
o n e, w h er e a d ef e n d a nt c ert ai nl y w o ul d ar g u e a b o ut his or h er st at e of mi n d).
T h e S E C a c c or di n gl y r es p e ctf ull y r e q u ests t h at t h e C o urt iss u e t h e att a c h e d pr o p os e d or d er li miti n g t h e
pr o d u cti o n of S E C c o m m u ni c ati o ns t o t he e xt er n al d o c u m e nts t h e S E C is c urr e ntl y r e vi e wi n g a n d
pr o d u ci n g , as w ell as t h e a g e n c y’s e x pr ess e d vi e ws a n d i nt er pr et ati o ns, i n a c c or d a n c e wit h t h e Or d er,
a n d b arri n g D ef e n d a nts fr o m s e e ki n g dis c o v er y of t h e p ers o n al d e vi c es or e m ails of S E C e m pl o y e es, at
l e ast a bs e nt a r e as o n t o b eli e v e t h at S E C e m pl o y e es c o n d u ct e d a g e n c y b usi n ess o n s u c h d e vi c es, as
pr o p os e d i n E x hi bit 2. As t his C o urt n ot e d wit h r es p e ct t o t h e S E C’s r e q u est f or t h e I n di vi d u al
D ef e n d a nts’ b a n k r e c or ds, a bs e nt e vi d e n c e t h at s u c h s o ur c es c o nt ai n r es p o nsi v e d o c u m e nts, s u c h
i ntr usi v e r e q u ests s h o ul d n ot b e gr a nt e d.
I V.

T h e S E C’s I nt e r p r et ati o ns a n d Vi e ws o n t h e L a w M ust B e a n d A r e P u bli c all y E x p r ess e d.

T h e S e c uriti es a n d E x c h a n g e A ct of 1 9 3 4 cr e at e d t h e S E C , 1 5 U. S. C. § 7 8 d, a n d C o n gr ess h as si n c e
e m p o w er e d it t o e n g a g e i n c ert ai n pr o c ess es t h at l e a d t o offi ci al S E C i nt er pr et ati o ns of l a w : ( 1)
a d mi nistr ati v e pr o c e e di n gs i n w hi c h t h e S E C p u blis h es “its fi n di n gs ” as t o s e c uriti es l a ws vi ol ati o ns
p urs u a nt t o st at ut or y a ut h orit y, s e e 1 5 U. S. C. § § 7 7 h- 1( a), 7 8 u- 3( a); ( 2) r ul e m a ki n g p urs u a nt t o t h e
A d mi nistr ati v e Pr o c e d ur e A ct, 5 U. S. C. § 5 5 1 et s e q. ; a n d ( 3) r e p orts t o “ p u blis h i nf or m ati o n c o n c er ni n g
a n y . . . vi ol ati o ns ” of t h e s e c uriti es l a ws. 1 5 U. S. C. § 7 8 u( a); s e e als o E x. 4 ( D efs.’ Br. i n O p p. i n
T etr a g o n Fi n. Gr p. Lt d. v. Ri p pl e L a bs, I n c. , 2 0 2 1- 0 0 0 7-M T Z) ( “ C h a n c er y Liti g ati o n ”) at 2 0- 2 3 (st ati n g
t h e f or e g oi n g t hr e e b asis of offi ci al S E C a cti o n). T h es e p ositi o ns ar e al w a ys a c c o m plis h e d b y a v ot e of
all of t h e S E C’s C o m missi o n ers. S e e als o S E C v. Z a h ar e as , 3 7 4 F. 3 d 6 2 4, 6 2 9 ( 8t h Cir. 2 0 0 4) ( “S E C
a cti o ns ar e n or m all y a ut h ori z e d aft er a m e eti n g wit h all fi v e m e m b ers of t h e C o m missi o n a n d r el e v a nt
m e m b ers of t h e st aff. T h es e m e eti n gs all o w f or dis c ussi o n a n d d e b at e wit hi n t h e S E C a n d r es u lt i n
3

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a p pr o v al of a n a cti o n o nl y aft er a c o ns e ns us i s r e a c h e d. ”). B y c o ntr ast, th e st at ut e s p e cifi c all y pre cl u d es
t h e a bs e n c e of S E C acti o n —t h e b asis for Ri p pl e’s “fair n oti c e ” d ef e ns e a n d th e I n di vi d u al Def e n d a nts’
s ci e nt er th e or y —f r o m b e i n g d e e m e d a n S E C p os iti o n. S e e 1 5 U . S. C. § 7 8 z (“ N o a cti o n or fail ur e t o a ct
b y t h e C o m missi o n . . . s h all b e c o nstr u e d t o m e a n t h at t h e p a rti c ul ar a ut h orit y h as in a n y w a y p ass e d
u p o n t h e m erits of, or gi v e n a p pr o v al t o, a n y s e c urit y or a n y tr a ns a cti o n or tr a ns a cti o ns t h er ei n. . . . ”).2
T h e Fr e e d o m of I nf or m ati o n A ct ( “ F OI A ”) r e q uir es t h e S E C t o dis cl os e d o c u m e nts t h at c o nt ai n a n y
offi ci al i nt er pr et ati o n of t h e f e d er al s e c uriti es l a ws, i n cl u di n g t hi n gs d es cri b e d a b o v e s u c h as a g e n c y
r ul es, b ut als o a br o a d er c at e g or y, i n cl u di n g p oli ci es, i nt er pr et ati o ns, a n d fi n al o pi ni o ns. S e e 5 U. S. C.
§ 5 5 2( a); s e e als o 1 7 C. F. R. § 2 0 0. 8 0( a)( 2)(i) ( S E C r ul e i m pl e m e nti n g F OI A r e q uir e m e nts); S c h w artz v.
I nt er n al R e v e n u e S er vs., 5 1 1 F. 2 d 1 3 0 3, 1 3 0 5 ( D. C. Cir. 1 9 7 5) ( F OI A d o es n ot pr ot e ct fr o m dis cl os ur e
d o c u m e nts t h at “r e pr es e nt p oli ci es, st at e m e nts or i nt er pr et ati o ns of l a w t h at [ a n] a g e n c y h as a ct u all y
a d o pt e d. T h e p ur p os e of t his li mit ati o n is t o pr e v e nt b o di es of ‘s e cr et l a w’ fr o m b ei n g b uilt u p a n d
a p pli e d b y g o v er n m e nt a g e n ci es. ”). T h us, t h e S E C p u blis h es o n its w e bsit e a cti o ns t h e S E C is t a ki n g or
c ert ai n r e g ul at or y a cti o ns it is c o nsi d eri n g t a ki n g, as w ell as f or m al st aff vi e ws t h at h a v e b e e n a d o pt e d
b y t h e a g e n c y a n d ar e t h us a p pr o pri at e f or p u bli c r el e as e. S e e A p p’ x A (listi n g w e bsit es w h er e s u c h
i nf or m ati o n is p u blis h e d). P arti c ul arl y r el e v a nt h er e is t h at t h e S E C p u blis h e d dir e ct g ui d a n c e o n t h e
iss u e of di git al ass et s e c uriti es i n t h e D A O R e p ort i n 2 0 1 7. S e e i d. Als o, e v er y S E C a cti o n r e g ar di n g
di git al ass ets — a n d l e g al bri efs fil e d t h er e wit h — s er v es as p u bli c g ui d a n c e o n t h e S E C’s vi e ws a n d
i nt er pr et ati o ns. E. g. , Br. of S E C i n S u p p. of U nit e d St at es, U nit e d St at es v. Z asl a vs ki y , N o. 1 7 Cr. 6 4 7,
2 0 1 8 W L 2 0 1 6 1 9 1 ( E. D. N. Y. M ar. 1 9, 2 0 1 8) ( d et aili n g S E C vi e w f or w h y H o w e y a p pli e d t o s al es of
di git al ass ets b y i n di vi d u al). A c c or di n gl y, t h e S E C d o es n ot h a v e i nt er n al, n o n- p u bli c d o c u m e nts t h at
e x pr ess t h e “ a g e n c y’s i nt er pr et ati o ns or vi e ws, ” E x. 1 at 5 2: 1 4- 5 3: 1 9, of t h e f e d er al s e c uriti es l a ws.
V.

T h e R e n e w e d R e q u est f o r I nt e r n al S E C St aff C o m m u ni c ati o ns Is C o nt r a r y t o t his C o u rt’s
O r d e r a n d D e m o nst r at es F u rt h e r Dis c o v e r y G a m es m a ns hi p b y D ef e n d a nts .

D ef e n d a n ts’ a p pr o a c h is p art of a p att er n of g a m es m a ns hi p wit h r es p e ct t o dis c o v er y a n d t h e f oll o wi n g
e x a m pl es s h o w t h at D ef e n d a nts d o n ot a ct u all y s e e k r el e v a nt e vi d e n c e, b ut r at h er s e e k t o h ar ass t h e
S E C, d er ail t h e c as e’s f o c us a w a y fr o m its m erits, a n d b o g d o w n t h e S E C wit h d o c u m e nt r e vi e w.
First , D efe n d a nts d e m a n d e d e m ails fr o m f or m er S E C C h air J a y Cl a yt o n, w h o s er v e d as C h air fr o m
2 0 1 7- 2 0 2 0, w hi c h D ef e n d a nts p ur p ort t o b eli e v e will c o nt ai n e vi d e n c e r el e v a nt t o t h e S E C’s vi e ws of
X R P, Bit c oi n, a n d et h er a n d c o ul d f u rt h er t h eir “f air n oti c e ” d ef e ns e, b as e d m ostl y o n t h e S E C’s
s u p p os e d f ail ur e t o “ pr o vi d e[] ” a n y “i n di c ati o n ” t h at X R P w as a s e c urit y f or t h e “ y e ars ” t h at X R P tr a d e d
i n p u bli c m ar k ets. S e e M ar. 6, 2 0 2 1 L ett er ( D. E. 7 0) at 2, 3. B ut t h e r el e v a nt p eri o d f or s u c h a
( m eritl ess) d ef e ns e d at es b a c k t o at l e ast 2 0 1 3 w h e n X R P b e g a n tr a di n g, a n d w h e n t w o of Ri p pl e’s
c urr e nt l a w y ers w er e C h air of t h e S E C a n d Dir e ct or of its Di visi o n of E nf or c e m e nt . D ef e n d a nts di d n ot
as k f or t h eir e m ails t o b e s e ar c h e d, e v e n t h o u g h t h e t h e n- C h air of t h e S E C m a d e p u bli c st at e m e nts as t o
h er o w n vi e ws o n w h et h er a di git al ass et is a s e c urit y ( w hi c h w o ul d pr es u m a bl y b e e n c o m p ass e d wit hi n
T h e S E C als o h as st at ut or y a ut h orit y t o d el e g at e “f u n cti o ns ” t o t h e st aff, 1 5 U. S. C. § 7 8 d -1( a), b ut t h e S E C h as n ot
d el e g at e d st aff a ut h orit y t o d et er mi n e w h et h er s o m et hi n g i s a s e c urit y. T h us , st aff c a n n ot r es ol v e t h at s u bst a nti v e iss u e f or
t h e a g e n c y wit h o ut a v ot e of t h e C o m missi o n ers. Si d ell v. C o m m’r of I nt er n al R e v e n u e , 2 2 5 F. 3 d 1 0 3, 1 1 1 ( 1st Cir. 2 0 0 0)
( “[ S]t at e m e nts b y i n di vi d u al I R S e m pl o y e es c a n n ot bi n d t h e S e cr et ar y [ of Tr e as ur y]. ”); W H X C or p. v. S E C , 3 6 2 F. 3 d 8 5 4,
8 6 0 ( D. C. Cir. 2 0 0 4) ( citi n g C hrist e ns e n v. H arris Ct y ., 5 2 9 U.S. 5 7 6, 5 8 7 ( 2 0 0 0) ( “ st aff o pi ni o ns l a c k f or c e of l a w. ”)).

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D ef e n d a nts’ e x p a nsi v e b ut m is g ui d e d t h e or y of rel e v a n c e) 3 a n d t h e th e n- Dir e ct or of E nf or c e m e nt l e d t h e
S E C’s i niti al e nf or c e m e nt eff orts wit h r es p e ct t o di git al ass et tr adi n g. D ef e n d a nts di d as k for th e e m ails
of th e th e n- Dir e ct or’s dir e ct r e p orts d uri n g t h e ti me th at th e y r e p ort e d t o hi m a n d w h e n a n y
r e c o m m e n d atio n t h e y m a d e for a n e nf or c e m e nt a cti o n wo ul d h a v e to b e v ot e d o n b y t h e C h air. W e
p oi nt t his o ut n ot t o su g g est t h at t h eir em a ils ar e rel e v a nt b ut, r at h er, t h at D ef e n d a nts k n o w t h ey ar e n ot
a n d t h at is w h y t h e y h a v e o mitt e d t h e t w o m ost p o w e rf ul d e cisi o n m a k ers a t th e a g e n c y d uri n g t h e
r el e v ant ti m e p eri o d fr o m t h eir list of cust o di a ns. Def e n d a nts’ re q u ests ar e n ot aim e d at g at h eri n g
r el e v a nt e vi d e n c e b ut a t g a mi n g dis c o v er y a n d s hifti n g t h e fo c us a w a y fr o m th e m erits of th e S E C’s
cl ai m t h at Ri p pl e s h o ul d h a v e c o m pli e d w it h t h e re gistr ati o n pr o visi o ns of th e f e d er al s e c uriti es l a ws.
S e c o n d , rel at e dl y, Def e n d a nts’ n ew re q u e st t h at t h e S E C s e arc h th e p e rs o n al d evi c es of SE C em pl o y e es
fits int o a br o a d er p a tt er n of tr yi n g to m a k e this c as e a b o ut ra n d o m a n d irr el e v a nt c o m m u ni c ati o ns b y
S E C st aff inst e a d of Rip pl e’s u nr e gist er e d off eri n g of X R P. T h er e is n o b asis t o beli e v e t h at SE C
e m pl o y e es us e d p ers o n al e mail a c c o u nts or d evi c es t o e x pre ss a g e n c y int er pr et ati o ns or vie ws o n
Bit c oi n, e t h er, or X R P to t h e m ar k et, s e e 4 4 U. S. C. § 2 9 1 1( a), i n p art b e c a us e, as D ef e n d a nts ar e a w ar e,
i nt er n al SE C p oli ci es pr o hi bit s uc h pr a ct ic es a n d e mpl o y e es ar e iss u e d offi ci al iP h o n es, e mail a cc o u nts,
a n d d es kt o ps or l a pt o ps. Ne v ert h el ess, t h e I n di vid u al D ef e n d a nts t ol d t he SE C t h at t he y will n ot
pr o d u c e r el e v a nt d o cu m e nts t h at are r es p o nsi v e t o S E C r e q u ests s er v e d mo nt hs a g o u nl ess t h e S E C
a c c e d es t o t h eir p l a n n e d intr usi o n i nt o t h e p e rs o n al c orr es p o n d e n c e of S E C e m pl o y e es.
T hir d , o n M ar c h 3 1, 2 0 2 1 D ef e n d a nts ser v e d a t hir d- p art y s u b p o e n a for d o c u m e nts rel ati n g t o F or m er
C h air C l a yt o n’s c o m p e ns ati o n aft er his t en u r e at t h e SE C. S e e E x. 5. At th e A pril 1 4 m e et a n d c o nf er,
Ri p pl e e x pl ai n e d t h at b e c a us e th e t ar g et e d fir m in v est e d e x cl usi v el y i n Bit c oi n an d et h er, t his r eq u est
w as pr o b ati v e to t h e “fi n a n ci al m oti v ati o ns ” of th e “ d e cisi o n- m a k ers ” in v ol v e d i n t h e d e cisi o n t o br i n g
this a cti o n. B ut this a cti o n w as a p pr o v e d b y a v ot e of th e full C o m missi o n a n d it is diffi c ult to f at h o m
h o w di s c o v er y of a n i n di vi d u al C o m missi o n er’s fi n a n c es is i n a n y w a y a p pr o pri at e u n d er th e F e d er al
R ul es of C i vil P r o c e d ur e, p a rti c ul arly w h e n t h e C o urt h a s a lr e a d y r ul ed t h at th e r e is n o n e e d t o pr o d u c e
th e b a n k r e c or ds of th e D ef e n d a nts i n t his c as e w h o m a d e h u n dr e ds of m illi o ns of d ol l ars fr o m a n ill e g al
off eri n g of se c uriti es.
It is cl e ar t h at D ef e n d a nts’ d e sir e to i g n or e th e Or d er a s well as t h eir a tt e m pt to e n g a g e in br o a d
dis c o v er y of th e p e rs o n al c o m m u ni c ati o ns a n d fi n a n c es of p u bl i c ser v a nts is d esi g n e d to distr a ct th e
S E C an d t h e Co urt fr o m t h e me rits of t h e cl ai ms ag ai ns t t h e m. W hilst t h e y n o w i nsist t h at i nt er n al st aff
vi e w s a r e si g nifi c a nt ( d es pit e t h e O r d er’s d e ni al of th eir re q u est for th os e d o c u m e nts), o nl y t w o m o nt hs
a g o D ef e n d a nts insist e d t o a di ff er e nt C o urt, i n a c as e th at re v ol v e d ar o u n d t h e m e a ni n g of this v e r y
l a ws uit, t h at “‘it is th e C o m missi o n a n d onl y th e C o m missi o n’ wh os e a cti o ns ‘ h a v e t h e f or c e a n d eff e ct
of la w.’ ” E x. 3 ( C h a n c er y Liti g ati o n B r.) a t 3 1 ( n oti n g t h at th e “ disti n cti o n b et w e e n St aff a n d t h e
C o m missi o n is a w ell-est a blis h e d an d criti c al di vi d e, carr yi n g i m p ort a nt l e g al disti n cti o ns ”).
T h e S E C res p e ctf ull y r e q u ests t h at t h e C o urt rej e ct Def e n d a nts’ im pr o p er dis c o v er y de m a n ds a n d iss u e
t h e att a c h e d pr o p os ed di s c o v er y or d er.
S e e, e. g. , A u g. 3 0, 2 0 1 3 L ett er fr o m C h air M ar y J o W hit e t o T h e H o n or a bl e T h o m as R. C ar p er
(htt p:// o nli n e. wsj. c o m/ p u bli c/r es o ur c es/ d o c u m e nts/ V C urr e nt y 1 1 1 8 1 3. p df ) ( “ W h et h er a virt u al c urr e n c y is a s e c urit y u n d er
t h e f e d er al s e c uriti es l a ws, a n d t h er ef or e s u bj e ct t o o ur r e g ul ati o n, is d e p e n d e nt o n t h e p arti c ul ar f a cts a n d cir c u mst a n c es at
iss u e. R e g ar dl ess of w h et h er a n u n d erl yi n g virt u al c urr e n c y is its elf a s e c urit y, i nt er ests iss u e d b y e ntiti es o w ni n g virt u al
c urr e n ci es … li k el y w o ul d b e s e c uriti es a n d t h er ef or e s u bj e ct t o o ur r e g ul ati o n. ”).

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R es p e ctf ull y s u b mitt e d,
c c:

All c o u ns el ( vi a E C F )

D u g a n Bliss

H a vi n g r r evivi e w w ed dt t h epparti es' ssuubb missi oons, t t h e C o urt m a k es t t h ef foll o o wi n ng g cl arifi ccati oons: T h e S E C m ust
e e e h e arti es'
missi ns, h e
h e oll wi cl arifi ati ns:
( o T h c c E m ust pr uu wit t mm u ni p arti ns n h hir e p er al a g e di n xt er nn al a gg ee vil esg aa
pr1) d Tu hee SS Eo CC mmmuustcpr oooddnsccee cchoo mm hirud- ccati ooes, iwitcl hu tdi n gd- xtartines, i n clnuci es,g seeuxt er ctalt oa pri nnci ees e. nnTddh me arar Eetet
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bj e
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p arti n ot pr o s bj ctnf oo al nt e
n e e d ci p a nts, dsuucbj eeict ttor a m priivil ergnealassg ertic oy n.c o m m u ni c ati o ns, s u c h as e m ails, a n d s u c h c o m m u ni c ati o ns
e
a en
( 2) T h e e n ee e dot pr
n e e dThneotSSbEE CCs enareecddh nn ot orprloooddguugceed. nfor m mal ii nt er n a g c orryescpoo mm dmmeuunni e,ati uocns, as umceh mas ee nmmdails,b et nnwdde s u c Sh E C
c i F or al ntr a- al e n c c o n nicc ati o ns, s
c s h
as a ails, aa e n
or
a
c m ni dis ns
diovisi mo uns c aticoussi nnege d ncot b e s e h er eh u dm,orall oo ggXggeR d. ar e r el e v a nt a n d dis c o v er a bl e. T o t h e e xt e nt t h at t h e
Bit oi n, Et ar c e
n d e d.
P
( E b eli e c y m f m a n d a a er or o m m ositi ati p ns ers dis vil e e d, s h dn, Et er euu m aa e P m ust b
S 3) CI ntr a-eavges n s u cmhe emor or a n i ntor nfal c m al pp ositicoonn opaa pperse dis ccussig nngg Bituccoi n, o cEtu hhmerents m, ustnn ddb X XRnRPot em dust n baee
or m al d or
u ni
ar pri ussi
Bit oi
e
m,
o
s e vil h g d o n d pr urt dd cts h t o a pri vile g o ass u e
priar c e e e fl org.a T h e prCoo dd uucceedirse u bj etct et poartipri vil oe cgee nti n erti to on.m eEEet-aa mn pl eso nf er u c h dd oo cc uu emmee ntsniiinnngcliss ee es
es t
xxa m d- c of s o n t h e r m nts cl uu dd u
pl es of
ai
Di visi o e d e e p t h eir l n alr r ep orts of nt er n al
pr es e nt n r r ipnorts, fifinett ers. ports of i i nt er n al w or ki n g gr oouups, or f for m m al ppositi oonn ppaappers s su ub b mitt eeddt t o t h e
orts, al e
gr ps, or or al ositi
ers
mitt o t h e
C
S oO mO missiEo n ers. Alt h o u g h ssuucchh dd oocc uu mmee nts mm aa yy ulti mmat el yy bbee pri vil ee ggee d, i inf or m m atio on nt th h at w o ul d bbee
R D R E D.
nts
ulti at el
pri vil
d, nf or ati
at
pr o vi d e d o n a pri vil e g e lloog, ss uu cc hh as d at es a n d p arti ci p a nts, mmaayy its elf b e rrel ee vvaa nt a n d is dis c o v er a bl e.
g,
its elf
el
nt
is
( 4) A An ny y dd ooccuu mmeents wit h hh h eld d oo nn t h e bbasis of pri vil eeggee m m ust bbee i d e ntifi e d oo nn aa pri vil eeggee l o g.
nts wit el
asis of pri vil
ust
pri vil
( 5) TThhee C Co ourt dir eects t h e pparti es t o cc oo nti nn uuee t o m e et- a a n d- c o nf er oo nn t h e r e m ai ni n g iss u es pr es eent eedd i n
urt dir cts
arti es
nti
m e et- n d- c o nf er
pr es nt
t h eir l ett ers.
R es p e ctf ull y, t th h e Cl er k of C o urt is dir eect ee dd t to o G R A N T i in n PP AA RR TT t th h e mm oti oo nn at E C F N o. 11 22 6.
e
of
is dir ct
e oti
at
6.
S O OO RR DD EE RR EE D.
D.
D at e d: M a y 6, 2 0 2 1
N e w Y or k, N e w Y or k

D at e d: MMaayy 6, 22002211
6,
N
N e ew w Y Y or k, N e ew w Y Y or k
or k, N
or k

6