The cryptocurrency company Ripple has taken the unusual step of filing a Freedom of Information request with the Securities and Exchange Commission, asking the agency to release documents concerning its determination that Bitcoin and Ethereum—the two most popular digital currencies—are not securities.
The request comes a month after the SEC sued Ripple and two of its executives, alleging that they sold unlicensed securities in the form of XRP, a cryptocurrency created by Ripple in 2012.
In a letter, Ripple asked for any correspondence between the agency and those who helped create Ethereum, including Vitalik Buterin and Joe Lubin. It also asks for letters between former SEC Chairman Jay Clayton, agency staff and members of Congress.
The request is based on the Freedom of Information Act (FOIA), a law intended to promote transparency in government. FOIA requests, frequently used by journalists, permit the public to demand non-classified documents from a wide variety of federal agencies.
In the case of Ripple, the FOIA demand appears to be part of a larger legal and public relations strategy to rebut the SEC’s allegations. In a reply brief filed on Friday in response to the agency’s complaint, the company denied that its sales of billions of dollars of XRP constituted investment contracts.
“The SEC’s filing, based on an overreaching legal theory, amounts to picking virtual currency winners and losers as the SEC has exempted bitcoin and
ether from similar regulation,” said the Ripple court filing.
The SEC’s decision to sue Ripple has resulted in the value of XRP, which had long been the third most valuable cryptocurrency, to plummet. In its court filing, the company claims the SEC “caused more than an estimated $15 billion in damage to those it purports to protect.”
The lawsuit between the SEC and Ripple represents uncharted legal ground in many respects. The agency claims that Ripple’s creation and distribution of XRP amounts to a new twist on an old scheme in which company insiders talk up an investment opportunity, and then enrich themselves when gullible newcomers buy in.
For its part, the company says it has never claimed that owning XRP amounts to an ownership claim in Ripple, which has long tried to persuade banks and financial institutions to use its software—and XRP—as facilitate global money transfers. The company also asserts that the price of XRP is not correlated to Ripple’s business activities, and notes that other agencies, including the Justice and Treasury Departments, have characterized XRP as a currency not a security.
In this context, Ripple’s demands for SEC correspondence about Bitcoin and Ethereum appear to be an attempt to portray the agency’s lawsuit as arbitrary and unfair. In particular, Ripple is likely to focus on the SEC’s 2018 conclusion that Ethereum is not a security—even though the Ethereum conducted a so-called “Initial Coin Offering” that gave outside buyers an opportunity to buy into the project early.
The SEC did not immediately respond to a comment as to whether it would comply with Ripple’s FOIA request, or instead invoke one of a variety of exemptions that allow agencies to refuse demands for documents. In its request, the company stated “Ripple is willing to pay fees for this request up to a maximum of $61.”