Ripple’s lawsuit against the US Securities and Exchange Commission (SEC) included one of the largest crypto exchanges in the case discovery, as the court granted Brad Garlinghouse’s motion to obtain Binance documents from the Cayman Islands.
Garlinghouse’s motion was filed as part of the SEC’s ongoing court case, which claims that Ripple’s sale of XRP was unregistered security offering worth more than $1.38 billion.
A judge grants Binance’s request for documents.
According to the SEC’s amended complaint, Ripple CEO Garlinghouse sold more than 357 million units of XRP to “public investors in the market,” with offers and sales made on “global” digital asset trading platforms as XRP was sold to investors “all over the world,” in violation of Section 5 of the Securities Act of 1933.
Garlinghouse’s Counsel filed a motion for international discovery earlier this week, requesting Binance’s Cayman Island documents.
“Mr. Garlinghouse seeks foreign discovery on the basis of his good faith belief that the listed entity possesses unique documents and information concerning this case, and specifically concerning the process by which transactions in XRP were allegedly conducted by Mr. Garlinghouse on foreign digital asset trading platforms,” according to the memorandum filed in support of Garlinghouse’s motu proprio.
According to the memorandum, the Securities Act only applies to domestic sales and offers, implying that the SEC can only prosecute services in the US, despite the fact that the majority of “overwhelming” XRP sales were conducted abroad.
“The Supreme Court has ruled that Section 5 of the Securities Act of 1933, which the SEC claims Mr. Garlinghouse violated, applies only to domestic securities sales and offers.”
According to defense attorney James K. Filan, the court granted the Garlinghouse’s Motion to Obtain International Discovery.
The SEC’s claims are doomed.
International discovery can serve as evidence to invalidate the SEC’s claims under Section 5 of the Securities Act of 1933, potentially leading to the defendants winning their motion to dismiss.
“In the case of transactions conducted on such foreign trading platforms, both the offers and sales of XRP occurred on the respective platforms’ books and records, and thus geographically outside the United States. For the reasons stated in Mr. Garlinghouse’s Motion to Dismiss, the SEC’s failure to allege domestic offers and sales should be fatal to its claims,” read the memorandum filed in support of the motion.