Securities and Exchange Commission v. Ripple Labs Inc. et al.
ORDER granting 925 Letter Motion to Compel. The SEC's motion is granted in full. The Clerk of Court is respectfully requested to terminate the motion at ECF No. 925. SO ORDERED. (Signed by Magistrate Judge Sarah Netburn on 2/5/2024) (dsh)
The Court first addresses Ripple’s procedural objections. Ripple argues that postcomplaint discovery is untimely and barred by the Court’s discovery ruling in June 2021. On
June 15, 2021, the Court denied without prejudice the SEC’s request to compel production of
post-complaint discovery. See ECF No. 249. That ruling was made in the context of expert
merits discovery and in light of an apparent agreement by the parties with respect to the scope of
expert testimony. It is therefore not controlling on the Court.
2022-2023 Financial Statements
The SEC seeks Ripple’s 2022-2023 financial statements for purposes of assisting the
Court in fashioning an appropriate remedy. See SEC v. Rajaratnam, 918 F.3d 36, 44-45 (2d Cir.
2019) (courts have “no hesitation in concluding that, in calculating the size of a penalty
necessary to deter misconduct, the extent of a defendant’s wealth is a relevant consideration”).
Ripple contends that its financial health is irrelevant to the Court’s determination because (1)
Ripple is not claiming an inability to pay any penalty and (2) the Court may determine an
appropriate penalty without such information. Ripple also argues that its financial statements are
The District Judge – and not this Court – will set an appropriate remedy based on
whatever considerations are permissible and reasonable. At this stage, the Court sees no basis to
short-circuit that inquiry by denying access to readily available information that may be
probative to the remedy stage. Accordingly, Ripple is ORDERED to produce its 2022-2023
financial statements under the parties’ protective order.
The parties dispute whether post-complaint contracts are relevant to the remedy to be
imposed. The SEC credibly argues that the District Judge may consider post-complaint conduct
when determining whether an injunction is necessary and just. Indeed, Ripple appears to argue
that an injunction should not be entered because its post-complaint conduct has been structured
in such a way to comply with the Court’s rulings. The SEC should be permitted to rebut that
statement. The Court is not convinced that the production of these contracts will result in an
improper or costly “mini-trial.” Accordingly, Ripple is ORDERED to produce its post-complaint
Post-Complaint XRP Institutional Sales Proceeds
Finally, the SEC argues that proceeds from pre-complaint Institutional Sales are relevant
to any disgorgement determination. See Vacold LLC v. Cerami, 545 F.3d 114, 122 (2d Cir.
2008) (the purchase of a security occurs when the parties to the transaction are committed to one
another). Ripple appears to agree with this statement of law but contends that its contracts did
not obligate the parties to any clear transaction. The controversy before this Court is whether to
order Ripple to answer this interrogatory and not what weight to assign to Ripple’s response.
Because the SEC has made a sufficient showing that this information may assist the Court in
fashioning its remedy, Ripple must respond to the Interrogatory. Accordingly, the Court grants
the SEC leave to serve one additional interrogatory. Fed. R. Civ. P. 33(a)(1).
The SEC’s motion is granted in full. The Clerk of Court is respectfully requested to
terminate the motion at ECF No. 925.
United States Magistrate Judge
February 5, 2024
New York, New York
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