Ripple filed the Motion to Strike, requesting the court to disregard testimony from SEC accountant Andrea Fox and supporting exhibits (the “Fox Declaration”).
Significantly, the SEC opposition brief opened by classifying Andrea Fox as a summary witness, saying,
“Ripple incorrectly claims this declaration constitutes undisclosed expert testimony. It does not. It is standard summary evidence permissible under Fed. R. Evid. 1006 in support of calculations for disgorgement. It is not an expert’s report, does not rely on specialized experience, and does not render any opinions at all, let alone an “expert” one. Nor does it present the testimony of a percipient witness. Rather, it applies basic arithmetic to Ripple’s financial records to streamline the presentation of the evidence to Judge Torres.”
Whether Andrea Fox is an expert or a summary witness is significant. In the Motion to Dismiss, Ripple argued that the SEC stated Fox was a summary witness, not an expert witness, and therefore could not offer new information. The SEC must disclose expert witness identities, testimonies, and exhibits during discovery.
Ripple must file its reply brief to the opposition brief by Thursday (May 2). The reply brief could focus on whether the Fox Declaration contained new information and exhibits.
Moreover, Ripple could argue that Andrea Fox is an expert witness. If an expert witness, the SEC would not meet discovery requirements, giving Ripple grounds for a Motion to Strike. Andrea Fox is an accountant in the SEC Enforcement Division.
SEC Reply Brief Filing and US Securities Laws
After the Ripple reply brief filing related to the Motion to Strike, the SEC must file a reply brief to a Ripple opposition brief by May 6. The briefs relate to the SEC opening brief, where the SEC argued for the court to deliver a punitive penalty and an injunction for breaching US Securities Laws.
The SEC argued that Ripple continued to breach US Securities Laws after the December 2020 complaint (post-complaint).
In the opposition brief, Ripple stated it limited post-complaint XRP sales to ODL transactions. The ODL contracts protect buyers from losses and prevent profits. Moreover, Ripple argued it ensured its institutional investors qualified as accredited investors. Sales to accredited investors are exempt from US securities laws.
While the ruling on the Motion to Strike warrants investor attention, the outcome of the Ripple case will have more significance. A punitive disgorgement and an injunction prohibiting Ripple from selling XRP to US institutional investors could impact XRP.
However, SEC plans to appeal against the Programmatic Sales of XRP ruling remains the focal point. In July 2023, Judge Analisa Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test. Another court ruling, classifying crypto as a security, would give the SEC more justification to regulate the crypto market.
In December, Judge Rakoff ruled Terraform Labs and Do Kwon failed to register Luna and TerraUSD as securities. In March, Judge Failla denied the Coinbase (COIN) Motion to Dismiss (MTD) charges for operating as an unregistered securities exchange. Coinbase filed a Motion to seek an interlocutory appeal against the ruling.