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SEC's request for disclosure of BG's and Larsen's personal financial records denied


Ripple has scored his next victory in his legal battle with the US Securities and Exchange Commission (SEC). Judge Netburn yesterday denied the SEC's request to release the personal financial records of Brad Garlinghouse and Chris Larsen. What reported Crypto report, the regulator claims that the documents could be relevant to individual lawsuits against Ripple's bosses to "demonstrate the sanity of the individual defendants and their efforts to increase the value of XRP."

Magistrate Judge Sarah Netburn, however, sees it differently. In their reasonsNetburn writes that "the SEC's requests for the Individual Defendants' personal financial records, other than the XRP transaction records already promised, are not relevant or proportionate to the needs of the case."

As Netburn explains, the party seeking the disclosure has the initial burden of showing that the disclosure is relevant. However, the SEC was unable to provide relevant evidence. Notably, the SEC had already received all business records related to the sale and transfers of XRP by Garlinghouse and Larsen, as well as all financial records related to compensation they received from Ripple.

Personal bank records, according to Netburn, do not have the ability to prove what the SEC alleges: individual violations of US securities regulations furthermore, the SEC also did not present evidence of covert transactions by Ripple's bosses. Netburn stated:

“The SEC has not presented any evidence that the Individual Defendants concealed transactions or that the documents produced support an inference of hidden transactions. (…) The SEC's belief that the Individual Defendants' bank records could show evidence of a speculative transaction that may have occurred (and that the Individual Defendants are not providing in their XRP transaction records) is not a basis on the which to order an expansive discovery in personal financial accounts ”.

As a result of the decision, the SEC must withdraw their requests to produce the Individual Defendants' personal financial records and their subpoenas from third parties. However, if the SEC still finds evidence that Garlinghouse and Larsen are hiding XRP transactions, the request can be renewed.

"If, as the discovery progresses, the SEC discovers evidence that the Individual Defendants have not received the records of their XRP transactions, it may provide that evidence to the Court and renew its application."

Implications for Ripple of the court's decision

As always, attorney Jeremy Hogan provided an evaluation via Twitter. There, he wrote that the dismissal of the motion is "a good sign" that the judge will also drop the lawsuits against Ripple's bosses. Additionally, Hogan also addressed the reasoning in which the judge displayed an above-average understanding of cryptocurrencies and blockchain technology. I know concluded:

“I recently suggested that the Court would not grant Ripple's motion of discovery if it intended to dismiss the Fair Notice defense. Conversely, I think Brad / Chris can take this as a good sign regarding their Motions to dismiss the lawsuits against them. #Quashed

Also, look at FN1. The judge AGAIN comments that the technical / operational aspects of XRP are important to the case. Ripple WANTS it to be about that. The SEC wants to stay out of it: they want it to be just about marketing and money; But this Judge is saying otherwise! ”.

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