SEC Suffers Huge Blow in its Lawsuit Against Ripple
- The SEC sued Ripple in 2020 over claims that top executives in the blockchain firm had sold coins as unregistered securities.
- Unregistered securities are securities that do not have valid registration statement on file with the SEC.
The US Securities and Exchange Commission just lost its bid to maintain the privacy status of internal documents pertaining to the Hinman speech after a judge ruled against its demands for attorney-client priviledge in its case as Ripple.
U.S. Magistrate Judge Sarah Netburn, denied the SEC’s request, branding it hypocritical. Bill Hinman, a former director of the SEC’s Division of Corporation Finance, had allegedly said that Ether, (ETH) was not a security. Hinman has been a central figure in the SEC’s rift with Ripple Labs over supposed unregistered securities offerings through Ripple (XRP) tokens.
The SEC claims that Hinman’s opinion was a personal matter but should be granted security since he obtained legal counsel from the commission regarding its policies. The judge slammed this claim, giving Ripple a huge boost in their legal standoff. Many in the Ripple (XRP) community view the draft of the Hinman speech which the SEC has sought to keep secret, as a crucial piece of proof that could be favorable to Ripple Labs. If the information in the speech documents is convincing enough, it might be a turning point for Ripple in the lawsuit, which can be a huge win for other cryptocurrency token issuers.
The ruling read,
The hypocrisy in arguing to the Court, on the one hand, that the Speech is not relevant to the market’s understanding of how or whether the SEC will regulate cryptocurrency, and on the other hand, that Hinman sought and obtained legal advice from SEC counsel in drafting his Speech, suggests that the SEC is adopting its litigation positions to further its desired goal, and not out of a faithful allegiance to the law.
Ripple Labs was sued by the SEC in 2020 after top executives in the firm, Brad Garlinghouse and Christian Larsen sold Ripple’s XRP coins as unregistered securities. In response to the lawsuit, the blockchain firm claim that Hinman had contradicted the SEC’s position when he said in a presentation in 2018 that Ether did not represent “securities transactions.”
The SEC has been ordered by the court to produce the disputed documents except it intends to appeal. However, many expect the SEC to appeal the case within the next couple of weeks. While the SEC continues its claim that Hinman’s speech was a completely personal drive, and was not intended to provide legal counsel, Judge Netburn argued that Hinman’s status at the time disproves this claim. The US judge noted that the SEC’s claim would have been valid if Hinman were a private citizen and might shield the drafts from disclosure.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
