Ripple Seeks XRP Transfer Data on Overseas Exchanges

Ripple's executives are seeking data on XRP transactions made on foreign exchanges to prove that most tokens were sold to non-U.S. citizens. It's the latest twist in the ongoing legal battle with the Securities and Exchange Commission.

Shutterstock cover by Wit Olszewski

Key Takeaways

  • Ripple's executives have filed a new motion requesting the Court to issue Letters of Request to foreign authorities.
  • The letters would be sent with the aim of collecting data on Ripple's XRP sales on 15 non-U.S. exchanges.
  • Ripple has submitted the motion in hopes of proving that its XRP sales were made outside the scope of the Securities Act of 1933.

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The legal team representing Ripple executives has filed a motion aiming to collect in-depth data on XRP sales conducted on foreign crypto exchanges. This is the firm’s latest move in the discovery process of the ongoing lawsuit.

Ripple Seeks Exchange Data for Defense

Ripple is hoping to use data of XRP sales on overseas crypto exchanges for its defense case against the Securities and Exchange Commission.

In the ongoing legal battle, Ripple is accused of selling XRP as unregistered securities. However, the company’s executives have claimed that the sales did not break U.S. law. They’re now hoping to prove their case by gathering new information from exchanges.

In a notice submitted Wednesday, co-defendants in the ongoing lawsuit Ripple executive chairman Chris Larsen and CEO Brad Garlinghouse have confirmed they are seeking data from 15 cryptocurrency exchanges where they made XRP transactions dating back to 2013.

The defendants requested the Court to issue Letters of Request under the Hague Convention to authorities in the Cayman Islands, Hong Kong, South Korea, the U.K., Singapore, Seychelles, and Malta. The request asks for information about the defendants’ XRP transactions, including how much XRP was bought and sold, IP addresses, and trading policy. The defendants claimed they were unable to source this data independently, and therefore needed the court’s help.

If approved by the judge, the letters of request will be issued to foreign regulators who will forward them to cryptocurrency exchanges where the defendants made transactions in XRP. The exchanges include AscendEx (formerly Bitmax), Bitfinex, Bitforex, Bithumb, Bitlish, Bitrue, Bitstamp, Coinbene, Coinone, HitBTC, Huobi Global, Korbit, OKEx, Upbit, and ZB Network.

With the request, Ripple hopes to be able to prove that the majority of XRP was sold on foreign exchanges that lie outside the scope of Section 5 of the Securities Act of 1933, the same regulation the SEC alleges that Ripple and its executives violated.

In the lawsuit filed in Dec. 2020, the SEC alleged that the defendants collectively sold more than $1.3 billion worth of unregistered securities in the form of XRP to investors across various global trading platforms.

The information it is seeking with letters of request would show that most of the defendants’ XRP sales were not domestic, and therefore not under the jurisdiction of U.S. regulations, their lawyers said. They argue that the U.S. Supreme has already ruled in a prior 2010 case (Morrison v. National Australia Bank) that the Securities Act of 1933 is only applicable to domestic sales and offers of securities. The motion stated:

“The discovery that the individual defendants seek will be relevant to demonstrating that the offers and sales that the SEC challenges did not occur in this country and are not subject to the law that the SEC has invoked in this case.”

The legal team added in the motion that documents would provide important evidence on whether the SEC’s jurisdiction extends to the sales of XRP on a particular exchange.

Notable cryptocurrency lawyer Jeremy Hogan agreed with the same argument on Twitter. “The issue is the SEC’s jurisdiction over sales to non-U.S. nationals,” he said. “If no jurisdiction, the SEC can’t do anything about them.”

The Discovery Process Continues

With the latest motion filed by Ripple, the discovery process in the lawsuit has taken a new turn.

So far, Ripple’s defense had been focused on fair notice. It argued that the firm should have been notified before the SEC decided to file a lawsuit. In response, the SEC attacked the defense by claiming there was no need for fair notice. To refute the defense, the agency requested the court to allow access to the legal advice Ripple received over XRP sales in the past. The case’s judge dismissed the request.

However, now the defense may have moved to question whether the SEC’s allegations hold legal ground on the basis that XRP sales have largely happened outside the U.S.

In regards to foreign discovery, the SEC has gathered data on XRP sales with foreign entities, including exchanges and Ripple’s business partners. However, in that instance, the objective was to check if XRP transactions from defendants affected the price of the asset on foreign exchanges.

It’s currently unclear whether Ripple will be allowed access to the exchange data for its defense, but it could be a huge win for them if the request is approved.

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