- The SEC is adopting the strategy to shield the identities of its expert witnesses in its case against Ripple Labs.
- The testimonies of the expert witnesses could have a significant impact on the direction of the case.
- Both parties have been slugging it out in court since the SEC instituted legal action in December 2020.
As the legal tussle between the lead securities regulator and Ripple Labs reaches a heightened crescendo, the SEC is taking the drastic decision of hiding the identities of three of its expert witnesses.
Unprecedented strategy by the SEC
The U.S. Securities and Exchange Commission has decided to shroud the identities of its expert witnesses in the landmark case against Ripple Labs, issuers of the XRP. Ripple Labs has criticized the move in its latest court filing, describing the strategy as “unprecedented”.
According to the filing, Ripple Labs revealed that the SEC had requested to “seal information” identifying one of the experts and has indicated plans to “extend the relief to three additional experts.” Ripple Labs told Judge Analisa Torres that it had spent nearly a week trying to reach a temporary compromise with the SEC on the matter.
“The SEC’s attempt to suppress public criticisms of its experts’ opinions is particularly egregious given that none of the SEC’s expert reports is likely to contain SEC confidential information,” said Ripple Labs. The San Francisco-based firm argued that the Commission was abusing the Protective Order (DE.53) which has been described as simply unprecedented.
In its defense, the SEC claims that the reason for protecting the identities of its expert witnesses and their testimonies is a result of “threats and harassment” faced by the witnesses on social media. The SEC noted that Patrick B. Doody had faced such threats to his person after six XRP holders challenged the strength of his expert witness. Doody has a history with the SEC after he was called to analyze the behaviors of token buyers in the Commission’s case against Telegram.
Ripple scores one over the SEC
The court denied a motion by the SEC to keep a speech by William Hinman, an ex-officer of the Commission where he argued that Ethereum was not a security. U.S Magistrate Judge Sarah Netburn described the SEC’s method as reeking of “hypocrisy” and one that places its goals ahead of the law.
The decision elicited waves of excitement within the cryptoverse with the experts calling it “significant tactical win” for Ripple. Hinman made the speech back in 2018 where he used the Howey Test to conclude that Ethereum was not a security and “applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value”.
The SEC began legal proceedings against Ripple Labs back in 2020 alleging that Ripple Labs were involved in the unregistered sale of security tokens running $1.3 billion while Ripple Labs maintains that the XRP coin is not a security.