In order to comply with the SEC’s request, Ripple must now submit terabytes of Slack messages that were previously withheld owing to an apparent data error.
The Securities and Exchange Commission (SEC) has requested access to one million missing Slack chats between Ripple employees, and U.S. Magistrate Judge Sarah Netburn has ordered the cryptocurrency exchange to disclose them.
Although Ripple asserted that compliance would cost up to $1 million, the judge found the messages to be crucial and unique evidence in the SEC’s continuing action against the multi-billion dollar business for selling securities without being registered.
The SEC filed a lawsuit against Ripple Labs and its initial and current CEOs, Christian Larsen and Bradley Garlinghouse, on December 20, accusing them of offering XRP as an unregistered security without obtaining the necessary regulatory approval.
In the first application to compel Ripple filed on August 9, the SEC said that the messages between Ripple workers were “relevant to the parties’ claims and defenses and proportionate to the needs of the case,” as reported by Law360.
The document further stipulated that, in addition to the Slack communications, Ripple should send all messages from 22 email archivists.
The Securities and Exchange Commission (SEC) informed Judge Netburn last month that the Slack communications that Ripple provided looked to be missing pieces of information.
Ripple first refuted the accusation, but later changed its position and claimed that it was the consequence of a data processing error that resulted in the business only providing a limited amount of the relevant messages, with more than one million messages being absent.
It was claimed by the SEC that Ripple’s failure to submit entire Slack records was “highly prejudicial,” based on information received by the SEC, which indicated that the remaining documents would be extremely relevant:
“These messages include: (a) discussions about Ripple’s desire to create speculative trading in XRP, (b) the effect of Ripple announcements and efforts on, and Ripple’s concerns as to, the price of XRP, the relationship and central importance of XRP sales to Ripple’s overall business, and (d) the regulatory status of XRP.”
Ripple maintained that it was unfair and unreasonable for the company to produce the messages at a cost of up to $1 million over a period of many months. Judge Netburn responded that the cost incurred by Ripple in producing the messages was outweighed by the significance of the communications to the case.
“Any burden to Ripple is outweighed by its previous agreement to produce the relevant Slack messages, the relative resources of the parties, and the amount in controversy,” Judge Netburn said.