- Judge rejects SEC request for secrecy of Bill Hinman’s speech.
- This is a “tactical victory” for Ripple.
- If the Court of Appeal also sticks to this decision, that could decide the case in favor of Ripple.
The US Securities and Exchange Commission (SEC) has suffered a setback in its proceedings against Ripple. A U.S. judge rejected her appeal of attorney-client privilege regarding internal documents related to the so-called “Hinman speech”.
In rejecting the request on Tuesday, U.S. District Judge Sarah Netburn pointed to the SEC’s “hypocrisy”. The agency argued that the speech in which former SEC employee Bill Hinman stated that Ether (ETH) was not a security was a personal matter for Hinman. At the same time, she also claims that this speech must remain under wraps, because Hinman had been legally advised by the SEC in order to be on the same line with the commission:
“This hypocrisy, on the one hand, arguing in court that the speech is not relevant to the understanding of the market about how or whether the SEC will regulate cryptocurrencies, and on the other hand, claiming that Hinman received legal advice from the SEC when writing his speech, suggests that the SEC adapts its attitude in litigation at will to achieve its desired goal, and not because it faithfully adheres to the law.”
The draft of the Hinman speech, the secrecy of which the SEC is fighting for, is considered by many in the Ripple (XRP) community as a crucial piece of evidence that could be good for Ripple Labs.
The SEC sued blockchain company Ripple in late 2020, accusing co-founders Brad Garlinghouse and Christian Larsen of selling Ripple’s XRP tokens as unregistered securities.
However, Ripple argues that former Division of Corporation Finance Director Bill Hinman’s 2018 speech in which he stated that ethers would not constitute “securities transactions” is at odds with the SEC’s stance on the matter.
This was not even a nuanced opinion. Judge Netburn tore apart every SEC argument for attorney-client privilege of the Hinman emails.
That starts the 14 day clock for an appeal to Judge Torres. And if her recent Orders are any precedent, things will move relatively fast. https://t.co/7k6KJx4Lea
– Jeremy Hogan (@attorneys) July 12, 2022
Subject to further appeal or delay, the decision states: “The documents must be presented.”
Gabriel Shapiro, the legal counsel of Delphi Digital, called this a “great tactical victory for Ripple” in a tweet on Tuesday.
wow. big tactical win for Ripple. https://t.co/oS4HRO1u2x
– _gabrielShapir0 (@lex_node) July 13, 2022
Some people think it is likely that the SEC will appeal. John E. Deaton, founder of the legal crypto news portal Crypto-Law, said on Twitter that the appeal will be received with the appeal of Ripple within 30 days. He also believes that the appellate judge will join Judge Netburn’s decision.
If there are no extensions granted, Judge Torres will have the SEC’s appeal and Ripple’s objection to the appeal in 30
Days. After Judge Torres upholds Judge Netburn’s decision, the SEC can ask Judge Torres to certify an appeal to the 2nd Circuit. She is likely to deny doing so. https://t.co/HtMjbjk2OK
– John E Deaton (205K Followers Beware Imposters) (@JohnEDeaton1) July 13, 2022
The SEC continues to insist that Hinman’s speech was a “purely personal matter” that was not intended as legal advice.
Judge Netburn conceded the designs could potentially be kept under wraps if Hinman has been out in private. However, Judge Netburn also wrote that at the same time, the commission argued that Hinman would not have had access to the information and resources if he had not already worked at the SEC:
“It was only in the context of his employment that he was able to obtain the edits and feedback he received.”
If the content of the speech is convincing enough, that could be a turning point for Ripple in this case. Namely, this case is considered a potential precedent for other similar crypto token issuers.