Ripple to have its cost of re-deposing Dr. Metz’s supplemental expert report covered by the SEC. 

The Ripple community was dealt a minor blow earlier today after Judge Sarah Netburn denied Defendant’s motion to dismiss the SEC’s supplemental expert rebuttal report from Dr. Albert Metz. 

The development led to the reopening of the discovery until May 13, 2022 to create an opportunity for Ripple and Individual Defendants to re-depose the Dr. Metz expert report. 

Interestingly, the Securities and Exchange Commission did not entirely come out victorious in a recent ruling, as the court criticized the securities agency’s decision to lately file an expert testimony. 

SEC Criticized and Fined

“The SEC has conducted itself improperly by serving an unauthorized supplemental report on the last day of discovery,” Judge Netburn’s ruling excerpt reads. 

Based on the court’s criticism of the SEC’s action, the Securities and Exchange Commission has been ordered to cover the necessary expenses that Ripple will incur in the process of filing a motion to re-depose Dr. Metz’s expert report. 

“The SEC is ordered to pay Defendants’ reasonable expenses in filing their motion to strike and re-deposing Dr. Metz,” Judge Netburn ruled. 

Prior to the ruling, both the plaintiff and defendants had initially agreed to bear the cost of the expenses that may arise from submitting their respective expert reports. 

However, following the SEC’s action, the agency will now have to cover expenses incurred by Ripple to re-depose Dr. Metz’s report. 

Dr. Metz Expert Report 

Meanwhile, Dr. Metz’s supplemental expert rebuttal report has been a major topic of discussion over the past few months. 

The deadline for expert testimony submissions was initially slated for August 2021. However, due to several disputes, the deadline was moved to January 14, 2022, and further pushed to February 28, 2022. 

The SEC, which had originally submitted its expert testimony, served the blockchain company with a so-called supplemental expert report from Dr. Metz on the last day of discovery on February 28, 2022.  

Ripple argued that the expert report filed at the deadline was impermissible, adding that the report did not bring any new information. 

The parties have filed different motions regarding the supplemental expert report, with the court finally putting the matter to rest. 

As reported, the report tends to determine whether Ripple’s announcement during the sale of the XRP token, which is deemed a security by the SEC, had any economic significance on the token’s price.

Ripple CEO Brad Garlinghouse owns Bitcoin, Ethereum & Other Cryptocurrencies.

Brad Garlinghouse, Ripple’s CEO and founder, disclosed in a recent CNBC event that tribalism around the world’s largest cryptocurrency Bitcoin (BTC), and other digital currencies has hampered the growth of the nascent industry. 

Speaking at a CNBC-hosted fireside chat at the Paris Blockchain Week Summit last week, as published by the CNBC today, Garlinghouse noted that the practice of tribalism in the cryptocurrency space is not healthy in his judgment. 

He said, “Polarization isn’t healthy in my judgment.” 

According to Garlinghouse, who was also charged by the SEC for his role in the $1.3 billion sales of an unregistered securities offering, being the CEO of Ripple (XRP) did not stop him from adopting other notable digital currencies. 

“I own bitcoin, I own ether, I own some others. I am an absolute believer that this industry is going to continue to thrive,” Garlinghouse said. 

Garlinghouse believes that adopting other digital currencies outside XRP will not stop Ripple’s native cryptocurrency from soaring because “all boats can rise,” he added. 

Bitcoin Tribalism Frustrating Industry Growth

While Garlinghouse did not mention the names of investors who have dedicated their funds exclusively to a particular cryptocurrency (Bitcoin), there are some investors who have only advocated for Bitcoin. 

“Tribalism around bitcoin and other cryptocurrencies is holding back the entire $2 trillion market.”  Ripple CEO said.

For instance, Jack Dorsey, the former Twitter CEO and founder of Square Inc. has publicly declared support for Bitcoin on several occasions and sponsored research to foster the development of the top asset class.

Dorsey noted earlier this year that he is a Bitcoin maximalist and is not considering adopting any other cryptocurrency, including Ethereum, in the near future. 

Similarly, Michael Saylor, the CEO, and founder of leading business intelligence company MicroStrategy has led the company to convert a huge percentage of its cash reserve to Bitcoin. 

The company has consistently bought Bitcoin and has added over 129,000 units of the world’s largest cryptocurrency. 

Commenting on this maximalism, Garlinhouse disclosed that the practice has frustrated efforts to lobby U.S. lawmakers, as most representatives would mainly agitate for the cryptocurrency they have in their holdings. 

“The lack of coordination in Washington, D.C., amongst the crypto industry, I find it to be shocking,” Garlinghouse added. 

SEC Slight Win against Ripple.

Efforts by blockchain company Ripple to strike Dr. Albert Metz’s supplemental expert report have ended in futility, as Judge Sarah Netburn has denied the defendants’ motion to strike. 

With the most recent ruling, the Securities and Exchange Commission’s late filings of Dr. Metz’s supplemental expert rebuttal report will stand. 

Recall that the deadline for the submission of all expert discovery reports was initially slated for August 16, 2021. However, following several disputes raised, the deadline was pushed to January 14, 2022, and subsequently February 28, 2022. 

At the last deadline on February 28, 2022, the SEC served the defendants a new supplemental report from Dr. Metz, while citing information that is already known by Ripple and the Individual Defendants. 

Based on this, Ripple moved to strike the Dr. Metz supplemental expert rebuttal report, saying the report does not meet the requirements of Civil Procedure Rule 26(e) and 37(c)(i). 

The SEC argued that the defendant’s motion is one filed to strike out expert testimony, which is essential in the case. 

“Defendants have not demonstrated that re-deposing Dr. Metz on his additional analysis and potentially filing their own supplemental reports would constitute, as they put it. […] Overall, given the harshness of preclusion, I decline to strike Dr. Metz’s supplemental report,” Judge Netburn ruled.  

Following the most recent ruling, the court extended the discovery deadline to May 13, 2022, to give more room to re-depose Dr. Metz’s analysis in the supplemental rebuttal report. 

It is worth noting that the Dr. Metz report is drafted to show the economic significance and effects of Ripple’s public announcement with regard to the value of the XRP coin. 

Court Says Estabrook Notes Are Protected By DPP

Meanwhile, Ripple also recorded another loss in the hallmark lawsuit after Judge Netburn denied Individual Defendant Brad Garlinghouse’s motion to compel the SEC into producing the Estabrook notes. 

In a recent ruling, Judge Netburn noted that Estabrook’s notes are no different from the documents the court deemed to be protected by the Deliberative Process Privilege (DPP). 

“The SEC’s fact-gathering from third parties is not an inherently privileged activity, but having reviewed Estabrook’s notes, I find that they could reveal to Garlinghouse the SEC’s internal thought processes during his meeting with Commissioner Roisman. The privilege applies,” an excerpt from the ruling, as shared by James K. Filan, reads. 

"The SEC’s fact-gathering from third parties is not an inherently privileged activity, but having reviewed Estabrook’s notes, I find that they could reveal to Garlinghouse the SEC’s internal thought processes during his meeting with Commissioner Roisman. The privilege applies."

— James K. Filan ????90k+ (beware of imposters) (@FilanLaw) April 19, 2022

Ripple to Rely on Hinman’s Emails

With Ripple denied access to Estabrook’s notes, the blockchain company would have to rely on an email containing a draft of SEC’s former Director William Hinman’s 2018 speech on Ethereum not being a security. 

Earlier this week, Judge Netburn insisted in her ruling that the SEC should surrender Hinman’s documents to Ripple. 

However, the SEC was also granted permission to redact certain portions of Hinman’s documents that reflect the personal thoughts of its staff before producing the documents to Ripple. 

With this decision, the SEC may edit some parts that could prove that XRP is not a security. 

In other news, Judge Torres also granted the Securities and Exchange Commission’s extension of time request to file an objection to Judge Netburn’s DPP ruling of Hinman’s emails. 

“The Objection is due 14 days after Magistrate Judge Netburn rules on the SEC’s new privilege assertions,” Filan noted. 

#XRPCommunity #SECGov v. #Ripple #XRP Judge Torres has granted the SEC’s Motion for Extension Time to file its Objection to Magistrate Judge Netburn’s DPP Ruling. The Objection is due 14 days after Magistrate Judge Netburn rules on the SEC’s new privilege assertions. pic.twitter.com/YMpj5dBEPN

— James K. Filan ????90k+ (beware of imposters) (@FilanLaw) April 19, 2022