The SEC has asked a court to sustain its objection to the recent court order relating to the Hinman Emails in its case against Ripple.
According to a reply brief from the SEC, it has defended its objection to court orders compelling it to produce draft emails of the Ethereum speech given in 2018 by William Hinman. At the time, Hinman was working as the director of Corporation Finance at the SEC. According to the brief, those speech drafts are irrelevant to the claims in their dispute with Ripple.
Ripple Accused of Inconsistency
The SEC claims Ripple has adopted a “fundamentally inconsistent argument” to force it to release the documents in question. Ripple’s legal team has asserted that Hinman’s speech was taken to suggest that the SEC did not consider XRP a security. However, that assertion is false, according to the SEC. The SEC provides a Fortune article, which says the XRP token affiliated with Ripple would struggle to meet the SEC’s standard for decentralization.
Further, the SEC states that the speech is protected by deliberate process privilege and attorney-client privilege. Thus far, all attempts by the SEC to keep the documents private have been rejected by Magistrate Judge Sarah Netburn.
In a previous response to the SEC’s claims, Ripple stated that the SEC had mischaracterized the judge’s opinion on its objection regarding deliberate process privilege. At the time, Ripple claimed that the SEC had no basis to find the court made any errors in its ruling regarding attorney-client privilege.
Ripple’s lawyers believe the documents may reveal the extent of the SEC’s awareness of common practices in the crypto trading world. Consequently, it could shed light on regulatory uncertainty, bolstering their fair notice defense. With these documents, Ripple believes it could potentially reduce potential disgorgement by the SEC.
Details of the Case
The SEC filed its case against Ripple Labs in December 2020. In this case, it is alleged that Ripple and two senior executives made unregistered, illegal securities transactions when they sold XRP seven years ago. According to the SEC, its authority comes from the 1933 Securities Act. Additionally, the SEC claims everyone involved in the transaction should have known XRP was a security.
The SEC thus claims that XRP is an investment contract in Ripple Labs, no matter who trades in it. However, unlike other cases where the SEC has forced crypto firms to fold, Ripple Labs has fought it. They put together a ferocious team of attorneys who have continued to fight for over two years.
At the core of Ripple’s defense is the Hinman speech. According to the lawyers, the speech documented the failure of the SEC to provide fair notice to the market regarding the status of XRP. Since the document became known, the SEC has been working hard to keep as many emails, speech drafts, calendars, and other documents related to his tenure secret.
Its determination could be pivotal to the future of token sales in the US. Besides that, it could spur the US Congress into action to create federal rules for the crypto sector.
