SEC v. Ripple: SEC Ordered to Handover Hinman Documents

SEC v. Ripple: SEC Ordered to Handover Hinman Documents

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Judge Analise Torres has ordered the U.S. Securities and Exchange Commission (SEC) to turn documents relating to former Division Director William Hinman over to Ripple Labs.

U.S. District Court Torres has overruled the SEC’s second attempt to withhold the Hinman documents on September 29. The documents in question relate to a speech delivered by William Hinman, who said that Bitcoin and Ether are not securities. In his speech, Hinman stated that Ether was not a security and for Ripple Labs, this is a key piece of evidence that the SEC had failed to present after it brought a suit against the company alleging that sales of Ripple’s XRP violated U.S. securities laws. Naturally, the circumstances surrounding the speech and Hinman’s actions leading up to it are a source of great confusion. According to a letter filed on September 29 by judge Torres, she overrules all three of the SEC’s previous objections to sharing the internal documents relating to the speech saying:

The Court has reviewed the remainder of the thorough and well-reasoned Orders for clear error and finds none. Accordingly, the Court OVERRULES the SEC’s objections and directs the SEC to comply with the Orders.

Judge Overrules SEC in Three Instances

Initially, the SEC was called upon by judge Sarah Netburn to hand over the documents in January, with the judge finding that they were not protected by deliberative process privilege (DPP). The SEC objected to the order the following month, claiming that the internal speech documents had no relevance to any claim or defense in this particular matter. Further, it argued that the DPP does, in fact, protect internal speech documents, and so does attorney-client privilege. The SEC has however been unsuccessful in its attempts to remove the documents from evidence and the court sided with Ripple on the matter by agreeing that the speech documents “may be used to obtain potential impeachment evidence or to impeach witnesses at trial,” including William Hinman.

Judge Torres further asserts that DPP does not apply in this instance because the requested documents do not relate to the SEC’s decision, position, or policy – only William Hinman’s personal opinion. Finally, she added that the court will not protect the documents with attorney-client privilege, as they were not clearly indented for “interpret[ing] and apply[ing] legal principles to guide future conduct or assess past conduct.”

The Intricacies of The Documents

The essence of the documents contains information relating to a speech that Hinman delivered at a June 2018 summit in which he asserted that the Ethereum network, cryptocurrencies, and trades do not constitute securities-related activities. He said:

Based on my understanding of the present state of Ether, the Ethereum network, and its decentralized structure, current offers and sales of Ether are not securities transactions.

The documents are however more broadly connected to an SEC lawsuit against Ripple Labs, its former CEO Chris Larson, and its current CEO Brad Garlinghouse in December 2020. The SEC alleges that the three entities – Ripple Labs, Garlinghouse, and Larsen -  illegally profited from selling XRP coins as unregistered securities.

Since the announcement of the win for Ripple, XRP has managed to rally by 10%.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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