The United States District Court for the Southern District of New York has delivered a significant ruling in favor of the Securities and Exchange Commission (SEC) in its ongoing case against Ripple Labs.
Magistrate Judge Sarah Netburn granted the SEC’s motion to compel, requiring Ripple to produce comprehensive financial statements for 2022-2023, post-complaint contracts, and to answer an interrogatory regarding the proceeds from institutional XRP sales after the complaint was filed.
Ripple’s procedural objections overruled
Ripple’s defense contended that the SEC’s request for post-complaint discovery was untimely and previously barred by the court’s ruling in June 2021.
However, Judge Netburn clarified that the earlier denial was contextual, tied to expert merits discovery, and not controlling in the current matter.
The judge has ordered Ripple to provide its 2022-2023 financial statements, which the SEC argues are essential for determining an appropriate remedy.
Despite Ripple’s claim that its financial health is irrelevant and highly confidential, the court has deemed this information potentially probative to the remedy stage.
Implications for remedy and injunctions
The dispute extended to whether Ripple’s post-complaint contracts should be disclosed since the SEC believes these documents could be crucial in deciding the necessity and justification of an injunction.
Judge Netburn has ordered the production of these contracts, siding with the SEC’s stance that they may reveal whether Ripple’s post-complaint behavior has complied with court rulings, potentially influencing the imposition of an injunction.
The SEC’s victory also includes Ripple being ordered to answer an additional interrogatory on the proceeds from XRP Institutional Sales after the initial complaint, which could influence the determination of any disgorgement.
Although Ripple disagreed with the relevance of this request, the court found the SEC had sufficiently shown that this information could assist in crafting an appropriate remedy.