After having its allegations of attorney-client privilege about confidential documents linked to the “Hinman speech” rejected by a U.S. judge, the U.S. Securities and Exchange Commission (SEC) has been dealt a setback in its lawsuit against Ripple.
In her decision to dismiss the application on Tuesday, U.S. Magistrate Judge Sarah Netburn criticized the SEC for its duplicity in saying that the statement in which a former official named Bill Hinman claimed that Ethereum (ETH) was not really a security, was a personal concern for Hinman. She also argued that it must be protected since Hinman had legal guidance from the SEC to validate the commission’s guidelines.
During the proceedings, Judge Sarah Netburn remarked:
“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.”
A Pivotal Piece Of Evidence For The Ripple Labs
Many members of the Ripple (XRP) community believe that the manuscript of the Hinman speech, which the SEC has indeed been fighting to keep secret, is a crucial piece of evidence that might work to the advantage of Ripple Labs. The SEC has already been fighting to keep the manuscript of the Hinman speech secret. In the latter half of 2020, the SEC filed a lawsuit against the blockchain company Ripple, alleging that top officials Brad Garlinghouse and Christian Larsen marketed Ripple’s XRP coins as unlicensed securities.
However, Ripple asserted that a speech by Bill Hinman in 2018 in which he claimed that Ethereum did not represent “securities transactions” opposed the approach that the SEC takes on the issue. Hinman was the former director of the Division of Corporation Finance at the SEC.
The judgment requires the production of the papers, barring any additional appeals or delays. In a Tuesday tweet, the general counsel of Delphi Digital, Gabriel Shapiro, referred to it as a strategic victory for Ripple. Some people have the opinion that an appeal by the SEC is very likely. John E. Deaton, the founder of the crypto legal news outlet Crypto-Law, informed his followers on Tuesday that the appeal and Ripple’s opposition would arrive within 30 days. He also expects the appellate judge will agree with the current judgment by Judge Netburn.
A Potential Breakthrough For Ripple In The Case
The SEC maintains its stance that Hinman’s speech was a “purely personal errand” that was not intended to provide legal advice to anyone. Judge Netburn acknowledged the possibility that the drafts would be protected in such a scenario if Hinman were a private citizen. However, in his opinion, Judge Netburn noted that the commission also asserted that Hinman would never have had access to sensitive content and assets if he had not already been employed by the SEC.
If the text of the speech transcripts is persuasive sufficiently, it might be a deciding factor for Ripple in the lawsuit, which has also been viewed as having the capacity to produce a standard for other providers of comparable crypto tokens.