Judge Not Cutting Ripple Slack Over Internal Messages
In the ongoing lawsuit between Ripple and the Securities and Exchange Commission (SEC), Ripple Labs has been ordered by United States Magistrate Judge Netburn to produce over 1 million Slack messages which they overlooked for earlier production. The Commission believes the messages contain vital company communications which may assist them in determining whether Ripple sold unregistered securities.
The lawsuit, which has been ongoing since the end of last year has pivoted once again. Earlier this year, Ripple fired back at the SEC and was granted access to the regulator's internal communications, which may be relevant as Ripple had engaged with the SEC around their XRP sale.
Ripple provided some messages last month but the SEC argued these were incomplete. Ripple denied this claim initially but then conceded there was a data processing mistake that resulted in the company only being able to produce a few messages, and more than 1 million were missing.
Ripple also sought to argue that the cost to retrieve the message (estimated at US$1M) was unfair and unreasonable but Judge Netburn responded, outlining the importance the messages may have 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
Some key take-aways from the recent developments in this case are:
care should be exercised with how company communications are stored, so that they can be produced with as little additional cost as possible; and
companies should be aware of their record keeping obligations under the jurisdictions in which they operate.
In particular, companies operating in Australia have record-keeping requirements under the Corporations Act 2001 (Cth) (the Act) which includes keeping appropriate financial records that correctly record and explain transactions and the company's financial position. Financial records must be retained for a period of 7 years and failure to do so is an offence under section 286 of the Act.