Securities and Exchange Commission v. Ripple Labs Inc.

Background

The Securities and Exchange Commission (SEC) moved to seal portions of filings submitted in connection with the parties’ cross-motions for summary judgment. Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen also moved to seal portions of those filings. Several non-parties made additional sealing requests, including Third-Party A, Third-Party B, Third-Party C, Investment Banker Declarant, Non-Party D, Investor A, Cryptocurrency Exchange, and MoneyGram International, Inc. The opinion states that all non-party names except MoneyGram are pseudonyms. Roslyn Layton moved to intervene to oppose the SEC’s request to seal the Hinman Speech Documents.

Legal standard

The court explained that filings relevant to a court’s work and useful in deciding a motion are “judicial documents.” Judicial documents carry a presumption that the public may access them, and that presumption is especially strong for documents submitted with a motion for summary judgment. A party seeking sealing must show, with specific facts, that sealing is necessary to protect a more important interest and that the requested sealing is narrowly limited.

The SEC’s requests

The SEC sought redactions for three categories: identifying information about its expert witnesses and XRP investor declarants; personal and financial information; and internal SEC documents concerning agency discussion and deliberation about former SEC Division of Corporation Finance Director Bill Hinman’s June 2018 speech.

The court granted the SEC’s request to redact the names and identifying information of SEC experts and investor declarants because disclosure could increase the risk of threats and harassment and impair judicial efficiency. It also granted the request to redact personal and financial information of defendants and certain third parties because those interests outweighed the public-access presumption and the information had limited relevance to summary judgment.

The court denied the SEC’s request to seal the Hinman Speech Documents. It held that the documents were judicial documents subject to a strong presumption of public access, regardless of whether the court ultimately relied on them or considered them admissible. The court also rejected the SEC’s arguments that sealing was needed to preserve openness and candor within the agency or to preserve a future privilege argument. Accordingly, the SEC’s motion was denied as to the Hinman Speech Documents and granted as to the names and identifying information of its experts and investor declarants and personal and financial information.

Defendants’ requests

The defendants sought sealing or redaction of confidential financial information; financial terms in Ripple’s contracts; identities of non-party financial institutions, business partners, customers, and employees; contact information; employee compensation; employment histories; confidential settlements; personal, familial, and financial information; personally identifying information; investment memoranda; and Ripple’s submission responding to an SEC Wells notice.

The court granted the defendants’ requests concerning much of Ripple’s non-public audited financial information, internal financial reports and forecasts, certain costs and business plans related to Ripple’s On-Demand Liquidity product, and Ripple’s bank statements. It also granted requests involving certain negotiated contract terms, some contracts in their entirety, non-party identities and contact information, employee compensation, employment histories, confidential settlement agreements, personal and familial information, financial holdings and account records, personally identifying information, investment memoranda, and Ripple’s Wells submission. The court found that these materials implicated business, proprietary, confidentiality, or privacy interests that outweighed public access, and that the proposed redactions were appropriately limited in most instances.

The court denied the defendants’ requests to redact references linking Ripple’s revenues with XRP sales; the compensation Ripple offered trading platforms to list XRP; the amounts of Ripple’s programmatic and institutional XRP sales; and the names GSR, Bitstamp, Coil Technologies, Inc., the XRP Ledger Foundation, and platforms that publicly make XRP available for trading. The court found that the defendants had not shown sufficiently serious harm from disclosing the past XRP financial figures and that the information was directly relevant to the investment-contract analysis under the Supreme Court’s Howey test. The court also found that the listed names were already public, publicly affiliated with Ripple, or relevant to the Howey analysis. The defendants’ motion was denied as to those matters and granted as to the remainder of their requests.

Non-parties’ requests

The court granted most requests by non-parties to seal or redact private financial, business, employee, representative, contact, digital-wallet, and identifying information. It denied Third-Party A’s request to redact its name, GSR, and the names of public cryptocurrency trading platforms. It also denied Cryptocurrency Exchange’s request to seal its name but granted its request to seal employee identities and personal information. The court granted Investment Banker Declarant’s request to redact identifying information, other non-party personal information, and the name of the declarant’s employer. The court granted the remaining non-party requests described in the order.

Because the court denied the SEC’s request to seal the Hinman Speech Documents, it denied Layton’s motion to intervene as moot.

Disposition

The court’s conclusion states that the SEC’s motion, the defendants’ motion, and the non-parties’ motions were each granted in part and denied in part. Specifically, the SEC’s motion was denied as to the Hinman Speech Documents and granted as to the remainder of its requests; the defendants’ motion was denied as to the specified XRP-related figures and names and granted as to the remainder; Third-Party A’s and Cryptocurrency Exchange’s requests to redact their identities and the names of public cryptocurrency trading platforms were denied; Layton’s motion to intervene was denied as moot; and the remainder of the non-parties’ motions were granted. Judge Analisa Torres directed the Clerk of Court to terminate the listed motions.